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The Management Board of the Mandatory Provident Fund Schemes Authority (MPFA) today (Thursday) endorsed in principle the regulatory framework for MPF intermediaries and laid down an examination syllabus for the regulatory purpose. The Code on MPF Investment Funds was also endorsed in principle.

MPFA Chairman Hon. Charles Lee Yeh-kwong said, "The MPF System is established for the workforce's retirement protection. It is important to ensure that MPF intermediaries are effectively and prudently regulated. While this will involve other financial regulators, the MPFA as the statutory body responsible for the regulation and promotion of MPF schemes will play the role as the lead regulator and co-ordinator in the regulation of MPF intermediaries. We will establish an MPF Intermediaries Regulation Co-ordinating Committee to co-ordinate the regulatory work of the various financial regulators."

Under the proposed framework, MPF schemes can only be marketed by intermediaries qualified under one or more of the three regulatory regimes, namely the Securities and Futures Commission, the Insurance Authority and the Hong Kong Monetary Authority. In addition, all MPF intermediaries must pass an MPF examination recognised by the MPFA.

Mr. Lee also pointed out that the MPFA had issued a consultation paper to the retirement schemes industry to invite comments on the proposed framework. The MPFA will take into consideration their views before finalising the details of the regulatory framework.

Mr. Lee said, "The MPFA will issue 'identity cards' to qualified MPF intermediaries. The MPFA will also maintain a register of qualified MPF intermediaries containing their particulars. The register, when ready, will be available for public inspection at the MPFA's office and on its future homepage. Enquiry hotlines will also be set up to handle enquiries."

The Code on MPF Investment Funds comprises three main parts covering requirements on constituent funds, approved pooled investment funds (APIFs) which are unit trusts and APIFs which are insurance policies. The ode will be issued to the industry once finalised.

Separately, the Hong Kong Independent Advertising Agencies Association has completed the design of the MPFA logo, which reflects the mission of the MPFA in assisting retirees to enjoy a secure and full life. Note: The Syllabus for Examination Paper for MPF Intermediaries is attached at the Annex.

– Ends –

15 April 1999

Annex

Syllabus for Examination Paper for MPF Intermediaries

I. Introduction on MPF

i. Need for Retirement Protection

A. Ageing Population

B. Current Retirement Protection

C. Mandatory Provident Fund Schemes Ordinance

ii. Why MPF?

A. World Bank Report "Averting the Old-Age Crisis"

B. Three Pillars for Old Age Protection

C. Advantages of Mandatory Provident Fund

II. Key Features of MPF

i.Coverage

ii.Enrolment

iii.Exempt Persons

iv.Types of MPF Schemes

v.Contributions

vi.Vesting

vii.Preservation

viii.Portability

ix.Withdrawal of Benefits

x.Offsetting of Long Service Payments/Severance Payments

xi.Major Obligations of Employers

III. Regulatory Framework under MPFSO

i.Trust Arrangement

A.Concept of Trust

B.Fiduciary Duty of Trustees

C.Recourse Against Trustees

ii.Approval of Trustees

iii.Registration of Schemes

iv.Approval of Investment Products

v.On-going Monitoring

vi.Sanctions and Penalties

vii.Various Levels of Protection

A.Capital Adequacy

B.Performance Guarantee

C.Professional Indemnity Insurance

D.Compensation Fund

viii.Functions of Trustees and Other Service Providers

IV. Interface Arrangements for ORSO Schemes and MPF System

i.Types of ORSO Schemes

ii.Exemption Criteria

A.Exemption Criteria for ORSO Exempted Schemes

B.Exemption Criteria for Relevant ORSO Registered Schemes

C.Exemption Criteria for ORSO Registered Schemes which are not Relevant ORSO Registered Schemes

iii. Options Available to Employers with Existing ORSO Schemes and Their Respective Obligations under Each Option

iv.Impact on Existing and New Employees

v.Guide to Exemption Procedures

V. Basic Concepts of Investment

i.Different Types of Financial Instruments

e.g. Money Market Instruments, Bonds, Equities, Derivatives, Unit Trusts & Mutual Funds, Insurance Policies, etc.

ii.Different Types of Investment Funds

e.g. Money Market, Bond, Equity, Growth, Balanced, etc.

iii.Evaluation of Performance Results

A.Investment Risk

B.Rates of Return

iv.Selection of Funds

A.Life Cycle

B.Economic Cycle

C.Investment Strategy

VI. MPF Schemes and Investment

i.MPF Schemes

ii.Constituent Funds

iii.Approved Pooled Investment Funds

A.Unit Trusts

B.Insurance Policies

iv.Types of Funds

A.Capital Preservation Funds

B.Other Types of Funds

v.Statement of Investment Policy

vi.Investment Standards and Restrictions

vii.Switching between Constituent Funds

VII. Role of Other Regulators under MPF System

i.Securities and Futures Commission

ii.Office of the Commissioner of Insurance

iii.Hong Kong Monetary Authority

VIII. Codes, Guidelines and Other Relevant Legislation

i.Codes and Guidelines

A.Code on MPF Investment Funds

B.SFC Code on MPF Products

C.Other Relevant Codes

e.g. SFC's Code on Unit Trusts and Mutual Funds SFC's Code on Pooled Retirement Funds

ii.Other Relevant Legislation

A.Securities Ordinance

B.Protection of Investors Ordinance

C.Insurance Companies Ordinance

D.Banking Ordinance

E.Others

IX. MPF Intermediaries

i.Regulatory Framework

ii.Licensing Requirements

A.Fit and Proper Criteria

B.Basic and Additional Requirements

iii.Responsibilities of Intermediaries

A.Understand Clients' Needs

B.Proper Investment Advice

C.Disclosure and Other Responsibilities

D.Sanctions and Penalties

iv.Codes of Conduct

A.MPFA's Code of Conduct for MPF Intermediaries

B.SFC's Codes of Conduct

e.g. Code of Conduct for Persons registered with the SFC

C.Codes of Conduct under Insurance Regime

e.g. HKFI's Code of Practice for the Administration of Insurance Agents