Chapter 11: Business practice

Question 1

1.1. Best interests of the client

Answer 1

A licensed firm shall carry out its engagements under this part in what it understands as the best interests of the client.

Question 2

1.2. Record keeping

Answer 2

A licensed firm shall ensure that it has appropriate records of work undertaken on behalf of clients.

Question 3

1.3. Accounting for rewards

Answer 3

A firm must account to the client for any pecuniary reward or other advantage arising out of his carrying on regulated activity. If a licensed firm receives any commission (or other benefit) because of acting for or giving advice to a client, or introducing a client to anyone, the licensed firm must account for the commission (or other benefit) to the client. There is no “de minimis” level below which it is not necessary to account to the client.

Question 4

1.4. Safekeeping of client’s property

Answer 4

If a licensed firm receives a client’s property, details of its receipt and location should be recorded, as appropriate. This may include cheques payable to an insurer, policyholder or third party, policy documents and share certificates. A licensed firm should take steps to ensure that such property is kept safely, and should consider the need to give the client a receipt for such property and also to record the return of the property to the client.

Question 5

1.5. Handling client money

Answer 5

There is no occasion that an actuary or his/her firm should be in possession of a client’s funds unless the firm is acting as a stockbroker or an underwriting agent (in which case it would be governed by the relevant legislation and regulations pertaining to that discipline).

Question 6

principles pertaining to holding client money

Answer 6

• Proper accounting and handling of client money is essential - records must be maintained.
• Client funds should be kept separate from the firm’s own money to protect it against general creditors’ entitlements in the event of the failure of the firm.
• If the money is held in a different currency, then steps should be taken to protect against currency fluctuation.
• Any interest earned on money held on deposit should accrue to the client.
• The firm owes a duty of care as to where the money is placed.
• When the money becomes due to the client (or due for onward payment) this should be done promptly.