Discussion Paper. Proposed Statutory Framework For Actuaries in Hong Kong

Transcription

1 Discussion Paper Proposed Statutory Framework For Actuaries in Hong Kong November 2013

2 The proposal It is proposed that the Society promote the introduction of a statutory framework for the regulation of actuaries in Hong Kong. When the proposal was first raised, it was anticipated that any statutory framework would simply involve the Society becoming a statutory body. However, after consultation with the Office for the Commissioner of Insurance and the Mandatory Provident Funds Scheme Authority, the Society has concluded that the appropriate model for any statutory framework is likely to be the model similar to adopted by architects and town planners, which would involve the establishment of a statutory Institute and a (related) statutory Registration Board. This discussion paper explains the reasons for and nature of the proposal, to enable the Society to consider and decide whether to proceed further with the proposal. The current position - reasons for change Currently, actuaries practising in Hong Kong are not directly regulated by any local regulator and have limited statutory obligations. It is not currently mandatory for actuaries practising in Hong Kong to be a member of the Society or any other professional body in Hong Kong. However, actuaries must in certain circumstances comply with the Society's Professional Standard 1 and Professional Standard 2. Specifically, insurers carrying on long term business are required to appoint an actuary under s. 15(1)(b) of the Insurance Companies Ordinance. For this purpose, an actuary is defined as being a fellow of a relevant professional body in England, Scotland, Australia or the US. Regulations made under the Ordinance then stipulate that an actuary appointed under section 15(1)(b) must comply with the Society's Professional Standard 1, and any subsequent amendments made with the approval of the Insurance Authority and the Secretary for Financial Services and 2

3 the Treasury. Additionally, under the Occupational Retirements Schemes Ordinance, certain occupational retirement schemes must be certified by an actuary. For this purpose, an actuary is defined as being a fellow of a relevant professional body in England, Scotland, Australia or the US, or any person who holds such qualification as the Registrar may accept as being of a comparable standard. Regulations made under the Ordinance stipulate that actuarial certificates must be prepared according to the Society's Professional Standard 2 as adopted by the Society on 2 September 1994, and any subsequent amendments made thereto by resolution of the Society and agreed to by the Registrar. There are references to actuaries in other legislation in Hong Kong, however there is no specific reference to the Society or requirement that a relevant actuary must be a member of the Society or any other professional body in Hong Kong. The principal reasons for promoting the introduction of a statutory framework for the regulation of actuaries in Hong Kong are that a statutory framework: o will ensure that actuaries are suitable to practise in Hong Kong, having knowledge of local regulations and accordingly being fit and proper to practise; o will enable professional standards to be developed and applied in respect of all actuaries in Hong Kong; o will ensure that actuaries practising in Hong Kong are supervised locally; o can promote a greater role for actuaries, by ensuring the profession as a whole is clearly defined and regulated; and o will provide greater status to the actuarial profession relative to other equivalent professions in Hong Kong. It is noted that a statutory framework, whereby actuaries 3

4 practising in Hong Kong are supervised locally, may be more consistent with international standards expected of financial centres. If the Society does not take the lead in promoting a statutory framework of its own choosing, it is possible that steps will be taken by the Government to impose a framework on the profession in due course. The proposed statutory model The proposed statutory model would involve the creation of two statutory bodies, being the Hong Kong Institute of Actuaries (the Institute ) and the Actuaries Registration Board (the Registration Board ). The Institute would be set up under a new Hong Kong Institute of Actuaries Incorporation Ordinance and the Registration Board would be set up under a new Actuaries Registration Board Ordinance. The Institute The Institute would essentially replace the current Society and operate under a constitution similar to the existing constitution of the Society. Membership of the new Institute would be voluntary. Initially, the Institute's membership would comprise all current members of the Society and its Council would comprise the existing Council members of the Society. However once the Institute has been established, in order to gain membership, new members would need to meet the Institute's qualification requirements, which in due course may include a demonstration of knowledge of local regulatory requirements (e.g. by passing examinations set by the Institute). The Institute may also set fees for membership and develop different types of membership, e.g. actuary, trainee and associate, as necessary. The Institute would be governed by a Council, which would be elected by the members of the Institute. The Institute would be responsible for administering qualification 4

5 exams, developing professional standards and codes of conduct, and promoting the profession generally. The Institute may also run a CPD program and develop training programmes for its examinations. The Registration Board The Registration Board would comprise a number of members (say 10) appointed by the Council of the Institute for specific terms (say 4 years) and possibly 1 or more members appointed by the Chief Executive of Hong Kong. The Registration Board would be required to maintain a register of registered actuaries and to set the qualification requirements for registration. Examples of possible qualification requirements might be: o membership of either the Institute or a recognised actuarial body of similar standing or has passed specified exams, including any exams administered by the Institute on regulatory for the requirements specific to Hong Kong; o residence in Hong Kong and minimum work experience; and o proof that the candidate is fit and proper. Non-members of the Institute could register as a registered actuary, provided they meet the qualification requirements set by the Registration Board (i.e. membership of the Institute would not be a condition of registration). This is because interested parties have expressed a concern that any qualification requirement which makes it compulsory for people to be a member of the Institute may contravene rights of freedom of association provided for in the Basic Law. A person whose name does not appear on the register would be prohibited from using certain descriptions and/or practising certain activities in Hong Kong. The exact prohibitions will be discussed and determined as part of the next stages of the 5

6 statutory body project. A registered actuary who commits misconduct or neglect in any professional respect would be liable to disciplinary proceedings. Misconduct or neglect in a professional respect would include failing to comply with professional standards and codes of conduct issued by the Institute. This would give the Institute's professional standards and codes of conduct application beyond the Institute's membership. The Registration Board would set the fees payable to it for registration. Implementation - legislation Implementing the proposal would involve consulting and gaining the support of interested parties and then securing the passage of new legislation. It is anticipated that any such legislation would have to be passed by way of 2 Private Member s Bills. The Society would keep members informed of progress and seek specific approval from members to proceed further if and when draft legislation is prepared, before any legislation is presented to LegCo. The Society would also consult The Hong Kong Institute of Architects and The Hong Kong Institute of Planners for their advice on their experience of becoming a statutory body. Step 1: Consultation The Society would first consult with interested Government departments and regulators to obtain their views and support (e.g. the Financial Services and Treasury Bureau, the Insurance Authority, the Mandatory Provident Fund Schemes Authority, and the LegCo s Panel on Financial Affairs). Step 2: Drafting The Society would then discuss and draft a detailed proposal for the new statutory framework, with a view to drafting two private 6

7 member s Bills (namely the proposed Hong Kong Institute of Actuaries Incorporation Ordinance and the proposed Actuaries Registration Board Ordinance) and seeking a sympathetic LegCo Member to sponsor the Bills. Step 3: Presentation of the Bills to LegCo Before the Bills can be presented to LegCo, a certificate from the Law Draftsman must be obtained, which certifies that the Bills conform to the requirement under the LegCo s Rules of Procedure and the general form of Hong Kong Legislation. Then, an opinion of the LegCo President must be sought. If he is of the opinion that the Bills relate to Government policies, the written consent of the Chief Executive must be obtained. Next, the Bills would have to be published in two successive publications of the Gazette and the notices of the Bills advertised twice in a Chinese and English daily newspaper. The sponsoring LegCo Member may then send a notice of intention to present the Bills to the Clerk to LegCo, together with a copy of the Bills, an explanatory memorandum (stating the contents and objects of the Bills), the written consent of the Chief Executive (if any), the Law Draftsman s certificate and a certificate signed by the Member. The Clerk will then arrange for copies of the documents to every LegCo member, and the Bills shall be deemed to have been presented to LegCo. Step 4: Passage through LegCo The Bills would have to proceed through various stages in LegCo. In short, the Bills must pass through three readings before they can be enacted. The time required could vary from as short as a single day to years, depending on the Bills' complexity and whether they are controversial. Private members Bills require a simple majority vote of each of the two groups of LegCo members present i.e. members returned by functional constituencies and members returned by 7

8 geographical constituencies. Step 5: Enactment The Bills would only take effect as new Ordinances after they are signed and promulgated by the Chief Executive. This would be done by publishing the Ordinances in the Gazette, and the new Ordinances would usually commence on the day of publication in the Gazette. Statutory Body Project Committee November

9 Frequently Asked Questions 1. Why is there a need for two separate statutory bodies? Interested parties have expressed a concern that any qualification requirement which makes it compulsory for people to be a member of a particular organisation in order to become qualified to practise may contravene rights of freedom of association under the Basic Law. Additionally, the current trend in financial regulation in Hong Kong is to move away from selfregulatory bodies. Accordingly, the Society has decided that the appropriate model for any statutory framework is likely to be similar to that adopted by architects and town planners, and should involve establishment of a registration board. If this model is adopted, the legislation establishing the registration board would make reference to an associated professional organisation, i.e. the Society. However, for the purposes of the model, the Society would need to be incorporated under its own legislation, to ensure the Society is a recognised and permanent statutory entity (rather than an entity which can be disbanded by its members at any time, as is presently the case). 2. What would be the role of the Institute? The Institute would essentially replace the current Society. The objects of the Institute would be, amongst other things, to promote the actuarial profession in Hong Kong, to raise the standard of professional actuarial services offered by members of the Institute and to act in such other manner as may be necessary to ascertain whether persons are qualified to be accorded professional recognition by the Institute. As such, the Institute would potentially be responsible for administering qualification exams (including examinations on regulatory requirements specific to Hong Kong), developing and issuing professional standards and codes of conduct, and promoting the profession generally. The Institute may also run a CPD program and develop training programmes for its 9

10 examinations. 3. Why would there be a need to change the name of the Society to the Institute? A body incorporated under an ordinance is usually named as an institute. This is to avoid confusion with societies established under the Societies Ordinance (Cap. 151). The change of name may also avoid confusion with the old Society (being a company limited by guarantee). Also, the proposed statutory framework is based on the model adopted by architects and town planners, which involved a statutory Institute and a (related) statutory Registration Board. By adopting the name of the Institute and the Registration Board, LegCo members can easily recognize that the proposed model is based on the model adopted by other professions, e.g., the architects and the town planners. The name of the Institute also conforms with other professional statutory bodies in Hong Kong (e.g. the Hong Kong Society of Accountants changed its name to Hong Kong Institute of Certified Public Accountants when it became a statutory body). 4. What would be the role of the Registration Board? The Registration Board would be required to maintain and publish a register of registered actuaries and to set and review the qualification requirements for registration. Also, the Registration Board would be empowered to make rules for the conduct and discipline of registered actuaries. 5. What would be the possible qualification requirements? The specific qualification requirements will be determined and refined if the proposal is developed further. Some of the requirements may be included in the legislation itself, and some may be left to the discretion of the Registration Board. By way of indicative example, it is possible that the legislation might provide 10

11 that the Registration Board shall not register a person as a registered actuary unless he:- 1. (i) is a member of the Institute or (ii) is a member of an actuarial body which is accepted by the Registration Board as being of the same standard of the Institute or (iii) has demonstrated knowledge of local regulatory requirements, possibly by passing examinations set by the Institute on regulatory requirements specific to Hong Kong, and has received such training as the Registration Board may require, either generally or in a particular case as a qualification of a standard not less than that expected of a member of the Institute; and 2. meets other requirements, including having at least, say, 1 year's work experience, being ordinarily resident in Hong Kong and being a fit and proper person to be registered. There would be provisions under the new Ordinance for applying for registration and examining the qualifications of a candidate for registration. 6. What is the relationship between the Institute and the Registration Board? The Institute would essentially be the professional organisation for actuaries and be responsible for promoting the actuarial profession in Hong Kong, developing standards and developing methods of assessing qualifications. The Registration Board's role would be to set the qualification requirements for registration, maintain the register and handle disciplinary complaints. Although the Institute and the Registration Board would be separate and distinct statutory entities, there would be a close relationship between the two. Although membership of the Institute would not be a condition of registration in order to avoid any concern with respect to freedom of association requirement in the Basic Law, candidates must meet the qualification requirements set by the Registration 11

12 Board, which may include passing examinations set by the Institute on regulatory requirements specific to Hong Kong. Passing the Institute's examinations may possibly be one of the requirements in order to become a member of the Institute. Codes of conduct: Any codes of conduct or professional standards issued by both the Institute and the Registration Board would be an important reference for any inquiry committee of the Registration Board in deciding whether a person has committed a disciplinary offence (please refer to FAQ 8 below). Membership: The Registration Board would comprise members appointed by the Council of the Institute. Accordingly, there may be considerable overlap between the membership of the Registration Board and the membership of the Council of the Institute. 7. How would the proposed statutory framework affect me as a current member of the Society? Upon the establishment of the Institute, all current members of the Society will automatically become members of the Institute, i.e. current members do not have to meet the Institute's future qualification requirements. It is also likely that all current members of the Society will, if they wish, automatically be registered as a registered actuary with the Registration Board, although it may be that the legislation and/or the Registration Board will require that current members meet certain of the future requirements for registration in order to obtain entry to the new register (e.g. being ordinarily resident in Hong Kong). Going forward, current members will be able to renew their registration by paying the registration fees as set by the Registration Board. They will be able to renew their membership with the Institute by paying the membership fees of the Institute. The statutory framework is likely to result in the introduction of new professional standards for registered actuaries. It is also possible that statutory framework may impose additional ongoing requirements to which all registered persons and/or members of 12

13 the Institute must adhere in order to maintain their registration/membership, e.g. CPD requirements. 8. How would disciplinary complaints be handled? Disciplinary complaints in respect of registered actuaries would be heard by an inquiry committee established by the Registration Board comprising not less than three members of the Institute. 9. What would constitute a disciplinary offence? A registered actuary would commit a disciplinary offence if he commits misconduct or neglect in any professional respect (or various other matters, e.g. conviction of an offence). The inquiry committee may, in deciding whether a person has committed a disciplinary offence, have regard to any code of professional conduct or practice promulgated by the Registration Board or currently in use by the Institute. 10. What would be the impact on the current legislation? There would be two new ordinance passed, one of which would establish the Registration Board and one of which would establish the Institute. There would also be consequential amendments made to any existing legislation to provide that any reference to an "actuary" will be a reference to an actuary registered with the Registration Board. 11. What would be the timing and cost of the process? The timing for settling and enacting any statutory framework is difficult to determine, because much depends on the outcome of the consultation and the response time of other persons and entities involved. The Society would anticipate, however, that it would take at least 2 years to complete the exercise and for any legislation to come into effect. The Society's legal advisors Reed Smith Richards Butler have indicated to support the Society's efforts and would therefore be willing to agree a discounted fixed fee, which is likely to be less 13

14 than $500,