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IAI Actuarial Core Principles · Business Management · Trusts and agency

Meera, an actuary, is appointed by a trust-based gratuity fund to advise its trustees on contribution rates. While advising, she learns that the fund's sponsor, a client of her consulting firm, is considering a lower contribution than she believes prudent. Which course of action best reflects her fiduciary position towards the trustees?

She should give the trustees honest advice on the prudent contribution rate and disclose the conflict arising from the sponsor relationship. Her duty of loyalty runs to those who appointed her, so commercial pressure from another client must not shape her advice.

  1. AGive the trustees her honest professional advice on the prudent rate and disclose the sponsor relationshipCorrect
  2. BRecommend the lower rate because the sponsor pays most of the firm's fees
  3. CKeep silent about the sponsor's plan to protect the firm's client confidentiality
  4. DResign from the firm's list of clients and ignore the trustees' request
  5. Give two different reports, one to the trustees and one favouring the sponsor

Explanation

An adviser to trustees owes loyalty and honest advice to those who appointed her. Her firm's relationship with the sponsor is a conflict that must be disclosed, not used to shade her advice. Favouring the sponsor or giving different reports would breach her duty.

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