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Statutory Regulatory Regime for MPF Intermediaries

1
When scheme members want to transfer their MPF accrued benefits, must this be done through intermediaries? Will it be quicker to complete the transfer process if it is done through an intermediary?
It is not necessary to transfer MPF accrued benefits through intermediaries. A scheme member may choose to make direct contact with the new trustee or through an MPF intermediary to arrange for a transfer, depending on his/her personal needs. Scheme member may obtain information and advice from MPF intermediaries about the MPF schemes and funds for which they act as an agent, or ask them to help handle MPF-related documents.
 
Whether the MPF transfer process is handled by the employee himself/herself or by an intermediary, the time required by trustees to handle a transfer is the same.
2
Can intermediaries charge scheme member a fee for the services they provide? If yes, are they required to disclose the actual amount of commission received?
MPF intermediaries can receive benefits directly or indirectly (such as commission or salary bonus) for services rendered. Nevertheless, according to trade practice, intermediaries normally do not charge fees or receive commission directly from scheme members.
 
When marketing an MPF product to a client, an MPF intermediary shall follow the “Guidelines on Conduct Requirements for Registered Intermediaries” to disclose whether he/she will charge the client any direct fees or whether he/she will be compensated (e.g. with commission) in respect of the services to be provided either directly or indirectly.
 
The intermediary shall also inform the client whether the benefits receivable would be different depending on the choice of the scheme(s) or fund(s) made by the client, e.g. whether the intermediary will receive different amount of commission if the client selects Scheme A instead of Scheme B. However, the guidelines do not require intermediaries to disclose the actual amount of commission and the difference in commission.
3
Can intermediaries offer incentives (such as gifts) for promoting their service?
According to the “Guidelines on Conduct Requirements for Registered Intermediaries” , intermediaries cannot directly or indirectly offer any rebate, gift or incentive to induce their clients to enrol in, or make contribution to, or transfer any benefits to, or retain membership in, a particular scheme. However, the above restrictions do not apply where the incentive offered takes the form of bonus units, bonus credits or rebates credited to the MPF account of the recipient of the offer, a non-monetary benefit (such as access to the premium service of a particular bank) associated with membership privilege programs offered by or approved by the approved trustee or sponsor of the registered scheme.
4
Is it illegal for intermediaries to use telemarketing or other channels to market the schemes they represent to “new customers”? 
Under the new regulatory regime for intermediaries, all companies or individuals, except as specified in the legislation, have to be registered as MPF intermediaries before they can engage in the regulated activities, such as marketing of MPF schemes.  It is an offence for anyone who is not a registered MPF intermediary to engage in such regulated activities.  The maximum penalty is a $5 million fine and seven years’ imprisonment.
 
Inducing or inviting a scheme member to transfer his/her benefits to another MPF scheme is one of the regulated activities.
 
The MPFA calls on scheme members to take caution when any person claiming to be an MPF trustee or intermediary approaches them.  Do not disclose any personal information to any other persons if in doubt.
 
The MPFS Ordinance does not restrict intermediaries to use any particular channel to promote MPF schemes to scheme members.  However, under the statutory regulatory regime for intermediaries, intermediaries must comply with the relevant laws and statutory conduct requirements, including conducting a “suitability assessment” for clients before promoting any particular fund, when selling or promoting MPF products or giving related advice to clients.
5
Can intermediaries promote other non-MPF investment products to scheme members together with MPF?
MPF intermediaries shall comply with the MPFS Ordinance and the “Guidelines on Conduct Requirements for Registered Intermediaries” when promoting MPF products.
 
The above ordinance and guidelines, however, only regulate the sale of MPF products, without prohibiting MPF intermediaries from selling other products at the same time.The sale of non-MPF investment products must be in compliance with other relevant regulations.
 
MPF intermediaries shall comply with the Personal Data (Privacy) Ordinance in the collection and use of the clients’ personal data.

Members of the public can lodge their complaints with the MPFA, which will then refer the complaint cases to relevant regulators for follow-up.
6
What conduct requirements must MPF intermediaries adhere to?
The statutory conduct requirements which must be met by registered MPF intermediaries cover the following key areas:
  • Acting honestly and fairly;
  • Acting in the best interest of the client;
  • Disclosing necessary information to the client; and
  • Endeavoring to avoid having a conflict of interest with the client (and disclosing such a conflict if it is unavoidable).
To assist MPF intermediaries and scheme members to understand these conduct requirements, the MPFA has issued the “Guidelines on Conduct Requirements for Registered Intermediaries”, listing the basic conduct required of the intermediaries during their marketing and sales of MPF schemes and provision of advice, such as what information they should provide to scheme members, procedures they should follow in marketing MPF schemes to scheme members, etc.
7
Can “suitability assessment” be waived for those scheme members who have completed a “suitability assessment” in purchasing other investment products?
The “Guidelines on Conduct Requirements for Registered Intermediaries” states that an intermediary shall conduct a “suitability assessment” before promoting and selling an MPF fund or giving advice to a client in relation to a particular fund, and then make recommendations according to the client’s risk profile. This requirement aims at protecting the interests of scheme members.
 
The guidelines also specify that when conducting a suitability assessment, an intermediary should acquire an understanding of the client’s personal circumstances, such as the client’s investment portfolio (including MPF portfolio), age, intended retirement age, financial situation, investment objective, investment knowledge, investment experience, risk tolerance and the level of risk the client is prepared to accept.
 
Whether an intermediary can make use of the “suitability assessment” a scheme member has completed earlier in purchasing other investment products to recommend a suitable MPF fund depends on various factors, such as whether the information required by the guidelines has been collected through the “suitability assessment”, whether the “suitability assessment” is completed recently, and whether there is any reason to believe that the personal circumstances of the client have been changed during the period.

If an intermediary makes use of personal data obtained from other channels, the intermediary should note whether the Personal Data (Privacy) Ordinance and other relevant confidentiality clauses have been complied with.
8
Will there be a “cooling-off period” for the transfer of benefit?  Why isn’t there a “cooling-off period”?
Under the regime on the regulation of intermediaries, there is a range of safeguarding measures implemented to ensure members are made fully aware of the risks and features of the funds before they decide to make a transfer. These measures include:
  • conducting a “suitability assessment” and select funds that suit the client’s risk profile before recommending any particular MPF fund;
  • explaining to the client in detail the key features of relevant scheme and funds.
 
In addition, if the client chooses a fund for which the risk level is higher than the client’s risk profile as assessed by the intermediary, an on-site audio recording should be carried out. If an on-site audio-recording cannot be arranged, the “principal intermediary” (generally refers to a company engaged in MPF sales and marketing activities) must choose to either (1) arrange a person to make an audio recorded post-sale call to the client within seven working days to confirm his/her choice; or (2) obtain a post-sale written confirmation from the client.
 
The MPFA has always emphasized that though the ECA will give employees the right to transfer MPF benefits, they are not obliged to make a transfer, nor should they do so hastily.  When an intermediary promotes a particular MPF fund to a scheme member, the member, instead of making a decision right away, should think twice before taking any action.
9
If an intermediary does not follow the “Guidelines on Conduct Requirements for Registered Intermediaries”, does it mean that it has broken the law as the statutory requirements are not met?
The “Guidelines on Conduct Requirements for Registered Intermediaries” aim to assist MPF intermediaries to meet the statutory conduct requirements. However, nobody will bear a civil or legal responsibility purely because the guidelines are not followed. Whether this will demonstrate that an intermediary not meeting statutory requirements need to be determined based on circumstances of the individual case.
10
How does a scheme member lodge a complaint on the marketing activities of an MPF intermediary?
If a scheme member thinks that an MPF intermediary has not complied with the conduct requirements, or suspects an unregistered intermediary is conducting unregistered marketing or sales activities, he or she can lodge a complaint with the MPFA by mail, telephone, fax, email, or in person .

Post:Level 8, Tower 1, Kowloon Commerce Centre, 51 Kwai Cheong Road, Kwai Chung, New Territories
Hotline:29180102
Fax:22598806
Email:mpfa@mpfa.org.hk
In person: MPFA offices
11
If an investigation by the MPFA confirms that an intermediary has not complied with the statutory requirements during marketing and sales, what disciplinary action will MPFA take? Will MPFA ask the intermediary to compensate his/her clients?
If an intermediary has violated the conduct requirements, MPFA can take disciplinary actions, including:
  • A public reprimand or reprimand;
  • Suspension of registration;
  • Revocation of registration;
  • Disqualification from re-registration within a specified period;
  • Fine (up to a maximum of $10 million or three times the profit gained or loss avoided due to conduct violation, whichever is higher).
The MPFA does not have statutory power to request an intermediary to compensate a scheme member for his/her MPF investment loss.

Last Revision Date: 18/08/2016