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Notice of Disciplinary Determination

On July 18, 2019, the Society of Actuaries convened a Discipline Committee to review a matter referred by the Actuarial Board for Counseling and Discipline (“ABCD”) related to the conduct of Michael W. Frank, FSA, MAAA, EA.  The Discipline Committee concurred with certain findings of the ABCD that Mr. Frank materially violated the Code of Professional Conduct (“Code”). The Committee felt that Mr. Frank's work product did not meet reasonable standards that would be expected from a member of the Society of Actuaries. The Discipline Committee further determined that discipline is warranted, and that Mr. Frank should be suspended from SOA membership for two and one half years, after which Mr. Frank may pursue readmission.

Mr. Frank is a sole practitioner who provides actuarial services to private defined benefit plans through Third Party Administrators. This matter arose from litigation involving improper Internal Revenue Service (IRS) filings made by one of Mr. Frank’s clients.  Although Mr. Frank was dismissed from the lawsuit, it uncovered numerous deficiencies in actuarial services provided by Mr. Frank, resulting in this disciplinary action.

Findings Regarding Precept 1 of the Code of Professional Conduct

The Discipline Committee concluded that Mr. Frank materially violated Precept 1[1] of the Code of Professional Conduct, because he did not exercise proper skill and care when preparing governmental filings.  He knowingly prepared, used and reported false information on matters relating to employee benefit plans and actuarial services, including backdating governmental filings, so as to reduce the likelihood of others detecting problematic figures presented on the filings and avoid potentially significant IRS penalties.  When presented with inconsistent plan information from his principal, Mr. Frank failed to reconcile and resolve those inconsistencies, and neglected to make necessary modifications to his valuations upon obtaining updated information.  Mr. Frank did not provide certain actuarial services necessitated by federal regulation, such as certifying the plan’s Adjusted Funding Target Attainment Percentage (“AFTAP”).  Mr. Frank was negligent in his professional obligations by allowing his principal to direct and limit his work to exclude responsibilities required under the law. When he allowed these limitations, Mr. Frank failed to inform his principal of the consequences of not obtaining an AFTAP certification, and for at least one year completed a valuation that failed to consider those consequences. The Discipline Committee concluded that these material errors collectively demonstrated an underlying lack of skill and care in Mr. Frank’s work as an actuary.

Findings Regarding Precepts 3 and 4 of the Code of Professional Conduct

The Discipline Committee agreed with the ABCD that Mr. Frank materially violated Precepts 3[2] and 4[3] which require an actuary to observe applicable Actuarial Standards of Practice (“ASOPs”).  Mr. Frank did not follow ASOP # 23 when he failed to question inconsistencies in the data provided by the principal or disclose those limitations and their implications.  Proper resolution of the inconsistencies may have had a material effect on the actuarial valuations provided by Mr. Frank. 

Further, the Discipline Committee agreed that Mr. Frank violated ASOP #41 in his failure to disclose necessary information regarding the defined benefit plan in question.  Mr. Frank was negligent in his professional obligations by allowing his principal to direct and limit his work to exclude disclosure and reporting responsibilities required under the ASOPs.  Moreover, Mr. Frank admitted to not having read ASOP #41 prior to his ABCD hearing. 

Conclusion

The Discipline Committee recognizes that Mr. Frank faced a difficult situation, particularly as a sole practitioner.  The circumstances of this case highlight the need for clear and appropriate terms of engagement, strong processes, and a complete understanding of the law and regulations. This case also demonstrates the importance of obtaining peer review of one’s work. Peer review helps to ensure relevant issues are addressed, work is completed in compliance with actuarial standards of practice, and supports maintaining the appropriate level of knowledge and understanding of the substantive and ethical obligations of the actuarial profession. These obligations exist for all credentialed actuaries. 

Mr. Frank demonstrated a lack of appropriate professional judgment when he accepted an assignment that limited his ability to comply with federal regulations and ASOPs and for which he was not supplied sufficient, timely or accurate plan data. Mr. Frank also seems to have lacked the necessary tools and/or knowledge to complete his assignment, even if provided with sufficient and timely data.  His willingness to allow his principal to direct his services in a manner which undermined his responsibilities under the Code of Professional Conduct and under the law materially impacted his professional actuarial obligations.  Therefore, the Discipline Committee has determined that discipline is warranted and that Mr. Frank be suspended from SOA membership for two and one half years. 

All members of the SOA are reminded of their responsibility to follow the Code of Professional Conduct. Members are also reminded that when they are faced with potential issues regarding professional conduct, the ABCD is available for counseling.


[1] PRECEPT 1. An Actuary shall act honestly, with integrity and competence, and in a manner to fulfill the profession’s responsibility to the public and to uphold the reputation of the actuarial profession.

[2] PRECEPT 3. An Actuary shall ensure that Actuarial Services performed by or under the direction of the Actuary satisfy applicable standards of practice.

[3] PRECEPT 4. An Actuary who issues an Actuarial Communication shall take appropriate steps to ensure that the Actuarial Communication is clear and appropriate to the circumstances and its intended audience and satisfies applicable standards of practice.