Originally published on March 29 2011
Keywords: new regulations, Hong Kong, mandatory provident fund
The Financial Services & the Treasury Bureau has submitted a
paper to the Legislative Council to enhance the regulation of
Mandatory Provident Fund intermediaries' sales and marketing
activities and invited comments from the public on or before 30
April 2011. A bill will be put before the Legislative Council with
the aim of the legislative amendments taking effect by 30 June
The legislative proposals will establish a statutory regulatory regime for MPF intermediaries before the implementation of the "Employee Choice Arrangement" to better protect the interests of MPF scheme members in Hong Kong, particularly in relation to advice given to employees wishing to transfer to another MPF scheme from the one chosen by their employer. According to the Mandatory Provident Fund Schemes (Amendment) Ordinance 2009 which was gazetted in July 2009, the Employee Choice Arrangement will enable employees to choose their own MPF service providers instead of having to abide by their employer's choice.
To minimise disruption to the existing regulatory arrangements and facilitate early implementation of the Employee Choice Arrangement, the Mandatory Provident Fund Schemes Authority will continue to be responsible for setting the standards for the industry and remain as the registration authority, while the Hong Kong Monetary Authority, the Insurance Authority and the Securities and Futures Commission will be the "frontline regulators".
The legislation will include:
- Prohibitions against engaging in regulated MPF sales and marketing activities other than by registered MPF intermediaries
- A registration regime for MPF intermediaries - principal and sponsored intermediaries
- The regulatory scope of the frontline regulators
- Conduct requirements for MPF intermediaries
- Regulatory powers to enforce the conduct requirements
- An appeals mechanism
- Arrangements for a two-year transitional period for pre-existing MPF intermediaries
The proposed regulatory regime for MPF intermediaries is
modelled on the existing administrative arrangements, with
modifications and enhancement as appropriate. The proposed
legislation sets out broad conduct standards with which MPF
intermediaries are obliged to comply. There will be requirements on
competence and integrity. In addition, principal intermediaries
i.e., at the entity level will be required to have a responsible
officer available to supervise the conduct of regulated MPF sales
and marketing activities carried out by sponsored intermediaries
i.e., at the individual salesperson level.
Principal intermediaries will also be required to establish and maintain proper controls and procedures for compliance with the legislation by themselves and by any sponsored intermediaries, to provide their responsible officer with sufficient resources and support to effectively supervise regulated MPF sales and marketing activities, and to be responsible for ensuring the maintenance of appropriate standards of conduct and adherence to proper procedures by their sponsored intermediaries.
As there may be a substantial increase in the number of elections by scheme members for the transfer of benefits among MPF schemes and with the aim of ensuring the accuracy of transfers, shortening the processing time and minimising the costs associated with transfers, the Mandatory Provident Fund Schemes Authority proposes to establish and operate an electronic transfer system (i.e., an e-platform) to facilitate the processing of scheme member elections by trustees.
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