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Prohibition on Regulated Activity

Prohibition on "regulated activity"


Disclaimer:  The information provided in the FAQs reflects the Authority’s views on the interpretation of section 34L of the MPFSO and related provisions.   It is provided without considering your specific circumstances, and should not be regarded as a substitute for professional advice.  Exceptions or qualifications not mentioned in the FAQs may apply in specific circumstances.  Independent legal or other professional advice should be sought before taking action on any matters to which the FAQs relate or in cases of doubt.  Please also refer to the “Disclaimer” section of this website.


The Mandatory Provident Fund Schemes Ordinance (Cap. 485) ("MPFSO") prohibits (section 34L) persons from carrying on (or holding themselves out as carrying on) a "regulated activity" (section 34F) in the course of their business or employment, or for reward.  There are certain exceptions (section 34M).

A person carries on a "regulated activity" if that person either:
  1. invites or induces, or attempt to invite or induce, another person to make a material decision; or
  2. gives regulated advice (by providing an opinion),
in relation to a matter specified in section 34F, unless an exception applies.

In determining whether an activity falls within the prohibition, the circumstances of each case must be considered.  The following provides some examples of how this prohibitilon applies.

Invitation or Inducement

Where a person merely issues an advertisement, invitation or document authorized by the Securities and Futures Commission ("SFC") under section 105 of the Securities and Futures Ordinance (Cap. 571) ("SFO"), he will not be regarded as carrying on a regulated activity by virtue of section 34F(2) MPFSO.

A person who does not give any regulated advice but provides information about MPF schemes and constituent funds may be regarded as inviting or inducing, or attempting to invite or induce, another person to make a material decision depending on the circumstances. For example, providing such information on an unsolicited or selective basis is likely to be construed as an invitation or inducement.

1
Is the provision of an offering document of an MPF scheme by a bank staff member a regulated activity?
This depends on the circumstances of each case. If, in the course of handing out the document, the bank staff member asks the recipient of the document to consider joining that MPF scheme, he will be regarded as inviting or inducing that person to become a member of that MPF scheme.

If, in the course of handing out the document, the bank staff member uses words to the effect "This MPF scheme is the best scheme on the market", he may be regarded as inviting or inducing, or attempting to invite or induce, the recipient of the document to become a member of that MPF scheme.
2
A bank  staff member introduces an MPF scheme to an employee by describing the features of that scheme, and uses words to the effect "You might like to join this scheme". He has not given any advice to the employee. Is he carrying on a regulated activity?
Yes, because the bank staff member is inviting the employee to make a decision as to whether to become a member of that MPF scheme (which is a material decision).
3
An insurance agent approaches an existing client and asks "Would you like to make voluntary contributions into this MPF scheme?" He has not given any advice to the client. Is he carrying on a regulated activity?
Yes, because the insurance agent is inviting the client to make a decision as to whether to pay voluntary contributions to that MPF scheme (which is a material decision).
4
A call centre staff member informs a scheme member that his MPF scheme now offers additional constituent funds, and provides him with factual information about those new funds. He does not give any opinion as to whether the member should make contributions to those funds. Is he carrying on a regulated activity?
The call centre staff  member is not giving any regulated advice because he has not expressed any opinion. He may, however, in some circumstances be regarded as inviting or inducing that member to make a decision as to whether to invest in those constituent funds (which is a material decision). It is likely, for instance, that he will be considered as inviting or inducing the member if the information is given on an unsolicited or selective basis.

 

Regulated Advice

1
An independent financial adviser informs his client that he does not sell any MPF schemes and hence cannot assist him in enrolling in any MPF scheme or investing in any constituent fund. He only advises his client to invest in Constituent Fund A of MPF Scheme A. Is he giving regulated advice?
Yes, because he is giving an opinion on whether his client should invest in a particular constituent fund.
2
In the course of his conversation with his client, an insurance agent advises his client on how to allocate his contributions among different constituent funds of MPF schemes. Is he carrying on a regulated activity? Does he need to obtain a licence under the SFO if the relevant advice is strictly limited to MPF schemes and their constituent funds?
Yes, he will be giving regulated advice if he advises his client on the amount of contributions to be invested in each of those constituent funds.  A licence under the SFO for the purpose of giving such advice would generally not be required if the relevant advice is limited to MPF schemes and their constituent funds only.
3
In the course of introducing the different constituent funds of an MPF scheme, an independent financial adviser explains to his client that one of these constituent funds is a feeder fund investing in an underlying approved pooled investment fund ("APIF"), and expresses an opinion that the underlying APIF is one of the best performers in the market. Is he giving regulated advice?
Yes.  Although "regulated activity" is limited to matters relating to MPF schemes and constituent funds, the financial adviser would be carrying on a "regulated activity" if he invited or induced, or attempted to invite or induce, a person to invest in that constituent fund by expressing an opinion on the underlying APIF.

Scheme Administration

Many tasks associated with the administration of an MPF account do not generally constitute a regulated activity. These include providing a specified form at the request of a scheme member, receiving or passing on to another service provider a completed form, or noting or processing change of personal details of a scheme member.

Although explaining a legal or procedural requirement, prompting clients to provide missing information in order to give effect to the client's instruction or stating an objective fact does not generally fall within the section 34L prohibition, the same action may amount to a regulated activity depending on the circumstances of the case.  Accordingly, unregistered staff involved in scheme administration should take care when responding to inquiries from, or communicating with, employers and scheme members. In cases of doubt, the matter should be handled by a registered intermediary.

1
An employer contacts the call centre of his MPF trustee and asks when he needs to enroll his new employee into his MPF scheme.  Can the call centre staff, not being registered as an MPF intermediary, advise the employer the date by which he has to enroll his employee?
Yes, because it is only for the purpose of complying with the requirement to enroll under the MPFSO.
2
A member contacts a call centre of his scheme administrator to find out which form he has to fill out to switch between constituent funds of his MPF scheme, and ask for assistance to fill out the form. Can the call centre representative respond without being registered as an MPF intermediary?
The call centre representative may direct the member to the appropriate form and help the member to fill out the form according to the instructions of the member without being registered as an MPF intermediary.

However, if he suggests another fund choice to the member, e.g. by stating "In your case, you might like to invest in Fund A rather than Fund B", or invites him to make additional voluntary contributions to the scheme, he will be carrying on a regulated activity.  In case of doubt, the  call centre representative should refer the matter to a registered intermediary.
3
A member contacts a call centre of his scheme administrator to ask about the differences between Fund A and Fund B of an MPF scheme. Can the call centre representative respond without being registered as an MPF intermediary?
Call centre staff of MPF trustees who are not registered as an MPF intermediary should avoid responding to questions which may involve a choice between funds of an MPF scheme.

If, in response to a question, the representative refers the member to the offering document of the MPF scheme that sets out the differences between the two funds, or reads out the information available in the offering document or the fund fact sheet in response to the inquiry in an objective and non-selective manner (and without any opinions), this is not likely to constitute a regulated activity.

If, however, the representative suggests that Fund B is the better choice for the member, the representative may also be regarded as inviting or inducing, or attempting to invite or induce, the member to invest in Fund B.

Seminars

Whether a speaker at a seminar on MPF matters is carrying on a regulated activity depends on the circumstances of each case. Providing information on MPF schemes and constituent funds in the course of a marketing event is more likely to be construed as an invitation or inducement, or an attempt to invite or induce, or giving regulated advice (if an opinion is expressed) to another person to make a material decision than merely providing general information about market or economic conditions.

1
A representative of the investment manager of an MPF scheme invites existing scheme members to a briefing to update them on the current economic environment and its impact on different asset classes, such as equities and bonds. Is the representative carrying on a regulated activity?
The representative is not likely to be regarded as carrying on a regulated activity in providing market information of a general nature to existing clients. However, if he then suggests that the existing scheme members should invest in a particular constituent fund because that fund invests in a particular asset class, e.g. "You should consider investing in this constituent fund because it invests in global equities", he will be giving regulated advice, as well as inviting or inducing, or attempting to invite or induce, the scheme members to make a material decision. Separately, if he takes the opportunity to introduce the existing scheme members to the new constituent funds of that MPF scheme, he may also be regarded as inviting or inducing, or attempting to invite or induce, those scheme members to invest in those constituent funds.
2
An insurance agent holds a briefing on an MPF scheme for its members whose employer participates in that scheme.   At the briefing, he explains the features of that scheme, including its constituent funds, the fees and charges, and the services provided to scheme members.  Is he carrying on a regulated activity?
Providing information on an MPF scheme and its constituent funds may be regarded as inviting or inducing another person to make a material decision, depending on the circumstances of the case.  For example, if, in the course of the briefing, the insurance agent encourages the members to make additional contributions to the scheme, to invest in a particular constituent fund of the scheme, or to transfer benefits from another scheme to that scheme, he  will be regarded as carrying on a regulated activity.
3
A representative of the investment manager of an MPF scheme invites self-employed persons who have not enrolled in any MPF scheme to introduce them to that MPF scheme and its constituent funds. Is the representative carrying on a regulated activity?
The representative will be regarded as carrying on a regulated activity since the purpose of the briefing is to invite or induce, or attempt to invite or induce, those self-employed persons to enroll in that MPF scheme and to invest in the constituent funds of that scheme.

Scope of the prohibition

1
Is a financial institution which markets APIFs to MPF trustees of MPF schemes, with a view to getting the constituent funds of those MPF schemes to invest in those APIFs, carrying on a regulated activity?
No, because APIFs are neither MPF schemes nor constituent funds and hence do not fall within the prohibition.
2
Does a conversation with friends or family at dinner discussing relative merits of particular MPF funds fall within the prohibition?
No, if it is not for reward, nor in the course of business or employment.
3
Does the provision of information by a data provider on MPF fund performance constitute the giving of regulated advice?
This depends on the nature of the information provided and how it is presented. In general, the provision of information which is merely factual and objective does not constitute the giving of regulated advice as it does not incorporate any opinion. However, the provision of such information may amount to the carrying on of a regulated activity if it is an invitation or inducement to, or an attempt to invite or induce, another person to invest in a particular constituent fund or to enroll in a particular MPF scheme.

Last Revision Date: 01/11/2012