The Actuarial Society of Hong Kong Proposed Statutory Framework for Actuaries in Hong Kong Statutory Body Project Committee October 2013
Background ASHK Council designated the Statutory Body Project Committee to explore the potential issues such to recommend how to turn ASHK into a Statutory Body. ASHK appointed an external lawyer, Reed Smith Richards Butler, to analyse the situation. In March 2013, the Committee informed our members of the proposed high-level changes to the ASHK relating to the statutory body project. 2
Background When the proposal was first raised, it was anticipated that any statutory framework would simply involve ASHK becoming a statutory body. However, after consultation with the OCI and MPFA, ASHK has concluded that the appropriate model for any statutory framework is likely to be similar to the model adopted by architects and town planners, which would involve the establishment of: a statutory Institute and a (related) statutory Registration Board. 3
Background It is proposed that the ASHK promote the introduction of a statutory framework for the regulation of actuaries in Hong Kong. The purpose of these presentation slides are: To explain the reasons for and nature of the proposal; To explain the implementation process of the proposal; and To enable ASHK to consider and decide whether to proceed further with the proposal. 4
Steps taken Q4 2012 March 12 March 21 April 5 April 15 July 18 August 1 August 2 Statutory Body Project Committee working with external lawyer to formalize the high-level proposal Email to all members the current high-level proposal Letter circulated by email to all members requesting feedback Evening meeting with members to walk through the proposal Deadline for the collection of comments from members Discussion in Council meeting to finalize the proposal. Several replies (written response as well as from the evening discussion) received and considered. Replies contained questions and comments. All were considered and reflected in later updates as appropriate. There were no replies which suggested any change in direction of the Committee s approach. ASHK Newsletter issued on the theme of Statutory Path Project Meeting with OCI Meeting with MPFA 5
The Current Position - Reasons for Change 6
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 ASHK or any other professional body in Hong Kong. However, actuaries must in certain circumstances comply with ASHK's Professional Standard 1 and Professional Standard 2. 7
The Current Position - reasons for change 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 ASHK's Professional Standard 1, and any subsequent amendments made with the approval of the Insurance Authority and the Secretary for Financial Services and the Treasury. 8
The Current Position - reasons for change 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. 9
The Current Position - reasons for change Regulations made under the Ordinance stipulate that actuarial certificates must be prepared according to ASHK's Professional Standard 2 as adopted by ASHK on 2 September 1994, and any subsequent amendments made thereto by resolution of ASHK and agreed to by the Registrar. There are references to actuaries in other legislation in Hong Kong, however there is no specific reference to ASHK or requirement that a relevant actuary must be a member of ASHK or any other professional body in Hong Kong. 10
The Current Position - reasons for change The principal reasons for promoting the introduction of a statutory framework for the regulation of actuaries in Hong Kong are that a statutory framework: will ensure that actuaries are suitable to practise in Hong Kong, having knowledge of local regulations and accordingly being fit and proper to practise; will enable professional standards to be developed and applied in respect of all actuaries in Hong Kong; will ensure that actuaries practising in Hong Kong are supervised locally; can promote a greater role for actuaries, by ensuring the profession as a whole is clearly defined and regulated; and will provide greater status to the actuarial profession relative to other equivalent professions in Hong Kong. 11
The Current Position - reasons for change It is noted that criticisms were made by the IMF that actuaries are not statutorily regulated in Hong Kong. As such, a statutory framework, whereby actuaries practising in Hong Kong are supervised locally, will 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. 12
The Proposed Statutory Model 13
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. The Registration Board would be set up under a new Actuaries Registration Board Ordinance. 14
The Institute The Institute would essentially replace the current ASHK and operate under a constitution similar to the existing constitution of ASHK. Membership of the new Institute would be voluntary. Initially, the Institute's membership would comprise all current members of ASHK and its Council would comprise the existing Council members of ASHK. 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. 15
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 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. 16
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. 17
The Registration Board Examples of possible qualification requirements might be: membership of either the Institute or a recognised actuarial body of similar standing; passing specified exams, including any exams administered by the Institute on regulatory for the requirements specific to Hong Kong; residence in Hong Kong and minimum work experience; and proof that the candidate is fit and proper. 18
The Registration Board 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. 19
The Registration Board 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 statutory body project. 20
The Registration Board 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. 21
Relationship between the Institute and the Registration Board Separate and distinct statutory entities with a close relationship 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 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. 22
Relationship between the Institute and the Registration Board 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. 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. 23
Implementation - legislation 24
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 Private Member s Bill. 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. 25
Implementation - legislation The Legislative process: 1. Consultation 2. Drafting 3.Presentation of the Bills to the Legislative Council (LegCo) 4.Passing through the LegCo the Three Readings 5. Enactment 26
Implementation - legislation 1. Step 1: Consultation ASHK 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. 27
Implementation - legislation 2. Step 2: Drafting ASHK would then discuss and draft a detailed proposal for the new statutory framework, with a view to:» drafting two private member s Bills, namely (i) the proposed Hong Kong Institute of Actuaries Incorporation Ordinance and (ii) the proposed Actuaries Registration Board Ordinance; and» seeking a sympathetic LegCo Member to sponsor the Bills. 28
Implementation - legislation 3. 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. 29
Implementation - legislation 3. Step 3: Presentation of the Bills to LegCo 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. 30
Implementation - legislation 4. Step 4: Passing 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 geographical constituencies. 31
Implementation - legislation 5. 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. 32
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. 33
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. RSRB have indicated to support ASHK's efforts and would therefore be willing to agree a discounted fixed fee, which is likely to be less than $500,000. 34
The Way Forward October 30 October 31 Members evening discussion meeting Consultation period for paper closes November 15 Updated papers will be circulated to all members ahead of the AGM December 12 Q1 2014 Q2 2014 2H 2014 EGM & AGM - Members will be asked to vote on a motion similar to the following The members of the ASHK are supportive of the current high-level proposals of the Society towards the creation of a statutory body or bodies governing Actuaries in Hong Kong, and request the Society to continue in the direction outlined. Consultation with other stakeholders in the insurance industry and other relevant industries Second consultation with regulatory bodies, drafting the outline of the proposed legislations Commencing the first step of the legislative process 35
Questions & Answers 36