The U.S. District Court for the Northern District of Illinois
recently dismissed breach of fiduciary duty claims leveled against
an actuary in the case Chua v. Shippee
(N.D. Ill., 2013) . The case arose out of a 412(i) life
insurance plan, which the IRS had disallowed and penalized the
sponsor and participants. The taxpayers sued an actuary who
had been involved in giving advice about the plan for breach of
fiduciary duties. The court dismissed the claims, because
being a fiduciary requires control over the plan or discretionary
authority over the administration of the plan or its assets.
Being an actuarial service provider to a plan, is not enough to
establish a fiduciary relationship, said the Court, regardless of
whether the actuary's advice is relied on:
As with the Reish defendants, plaintiffs also fail to allege
adequately that Shippee was engaged in fiduciary functions.
Plaintiffs have adequately alleged that Shippee gave them what
amounted to bad advice, but that does not make him a fiduciary. Nor
does the fact that the plaintiffs relied upon and followed
Shippee's bad advice make Shippee a fiduciary. Pappas v.
Buck Consultants, Inc., 923 F.2d at 538. Plaintiffs'
allegations make it clear that the decisions remained with
The court in Chua v Shippee, emphasized the fact that
the clients always retained the final decision-making authority and
so the elements for a fiduciary duty were not established.
From a legal liability standpoint, actuaries do not want to be
considered fiduciaries. The duty of care of a fiduciary is
higher; the scope of the duty can sometimes include liability for
breaches of co-fiduciaries; and the statute of limitations may be
different. Fiduciaries under ERISA may be sued by plan
participants while non-fiduciaries generally cannot.
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A new ethics standard for certified public accountants will likely create ripples in the legal pond, too. The standard, intended to preserve CPA independence, could preclude accountants from providing expert witness testimony and forensic services in certain circumstances.
In a recent Section 21(a) Report, the SEC explained that—although tax services and other non-audit services provided by an auditor may be permissible—the way they are provided may adversely affect the auditor’s independence.
The SEC recently issued for comment a proposed roadmap for
initially allowing and eventually requiring U.S. issuers to report
financial results in accordance with International Financial
Reporting Standards ("IFRS") as issued by the
International Accounting Standards Board ("IASB") rather
than generally accepted accounting principles in the United States