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The MPFA reprimands and fines MPF principal intermediary¹  The Hongkong and Shanghai Banking Corporation Limited (HSBC) $24 million.  The MPFA also reprimands and disqualifies YIP Sze Ki (YIP) from being approved as a responsible officer (RO) of an MPF principal intermediary for 18 months from 5 July 2024 to 4 January 2026².

Between April 2020 and February 2021, HSBC operated a referral programme (Programme) under which HSBC recruited human resources agencies or recruiters (who were not registered intermediaries) as referral agencies (Introducers) to refer potential MPF corporate clients to HSBC. The Introducers were offered referral fees from HSBC if a referred client, the Introducers themselves and/or their associated companies participate in, make MPF contributions to, and/or transfer MPF to the HSBC’s MPF scheme (HSBC Scheme). Under the Programme, HSBC signed agreements with five Introducers and received six referrals of corporate clients from three Introducers until the Programme was suspended in February 2021. All agreements in relation to the Programme were terminated by June 2022.

Following a referral from the MPFA, the Hong Kong Monetary Authority (HKMA) conducted an investigation into the matter.  After assessing HKMA’s investigation findings, the MPFA concluded that HSBC did not comply with the conduct requirements under the Mandatory Provident Fund Schemes Ordinance, Cap. 485 (MPFSO) and Guidelines on Conduct Requirements for Registered Intermediaries (Conduct Guidelines) in relation to the Programme by:

1. offering incentives to the Introducers for the purpose of encouraging clients to participate in, make MPF contributions to and/or transfer MPF to the HSBC Scheme; and

2. having inadequate controls and procedures for securing compliance with Part 4A of the MPFSO by HSBC and its subsidiary intermediaries , including to ensure that only registered intermediaries are engaged in undertaking regulated activities on behalf of HSBC.

The MPFA is of the view that HSBC has failed to have due regard to the prohibition of offering incentives as stipulated in paragraph III.6 of the Conduct Guidelines when launching the Programme, and had not put in place a rigorous framework that can (a) identify matters that require compliance by itself and its subsidiary intermediaries; and (b) put in place controls, procedures and other arrangements to ensure compliance with the said prohibition.  Furthermore, when conducting the Programme, HSBC has allowed unregistered persons (i.e. the five Introducers) to perform regulated activities⁴.

YIP was a former RO of HSBC responsible for overseeing the approval and implementation of the Programme until November 2020. YIP failed to identify the risks of not complying with the relevant conduct requirements, including the regulation of offering incentives, and the prohibition of using unregistered persons to conduct regulated activities.  The MPFA considers that HSBC’s failures were attributable to the neglect of YIP as an RO.

Ms Cynthia Hui, Chief Operating Officer and Executive Director of the MPFA, said, “It is a fundamental regulatory requirement that only registered intermediaries with requisite qualifications and training are allowed to sell and market MPF schemes.  Allowing unregistered intermediaries to do so strikes at the heart of the regulatory regime, which is not tolerated under any circumstances.”

“The regulation of the offering of incentives by intermediaries under the Conduct Guidelines is to ensure that employers and MPF scheme members can make independent and informed decisions, not driven by incentives offered to unregistered intermediaries, which would unnecessarily lead to frequent switching of MPF schemes that is not in their best interests”, Ms Hui added.

Mr Raymond Chan, Executive Director (Enforcement and Anti-Money Laundering) of the HKMA, said, “Authorised Institutions are expected to have appropriate systems and controls in place to ensure compliance with applicable legal and regulatory requirements under the MPFSO and the Conduct Guidelines when carrying on MPF business”.

In deciding on the disciplinary sanctions against HSBC and YIP, the MPFA took into account all relevant circumstances, including:

(a) the nature, seriousness and impact of HSBC’s non-compliance;

(b) the approximate assets under management involved in the sum of over $240 million in respect of more than 2,400 MPF scheme members; 

(c) there is no client complaint of financial loss received as a result of HSBC’s non-compliance;

(d) HSBC has engaged an independent external reviewer upon the MPFA’s request to assess the effectiveness of its internal control and to prevent any similar case from occurrence in the future;

(e) the Programme was in operation for more than 10 months until its suspension in February 2021. The agreements with the five Introducers in relation to the Programme were eventually terminated by June 2022;

(f) HSBC's cooperativeness with the MPFA in resolving the MPFA’s concerns;

(g) the role YIP played and his degree of responsibility in relation to the launch of the Programme;

(h) the need to send a strong deterrent message to the industry that such non-compliance is not acceptable; and

(i) HSBC and YIP’s otherwise clean disciplinary records with the MPFA.

A copy of the Statement of Disciplinary Action is available here.

– Ends – 
5 July 2024

_{1. A principal intermediary is a business entity registered by the MPFA to engage in conducting MPF sales and marketing activities and giving regulated advice.}

_{2. YIP (MPF Registration No. 114770) was a responsible officer attached to HSBC from 7 July 2017 to 16 November 2020.  YIP was de-registered as an MPF intermediary on 24 February 2021.  He was also the Head of Pensions of HSBC at the material time, overseeing the MPF business and sales activity of frontline staff.}

_{3. A subsidiary intermediary is a person registered by the MPFA to carry out MPF sales and marketing activities and to give regulated advice on behalf of a principal intermediary to which the person is attached.}

_{4. The MPFSO prohibits any person to carry on regulated activities unless such person is a registered intermediary.}