Intermediaries under MPF reform: industry feared overlapping “one trade, four regulators”

This article is a rewrite of a report from July 2012.

As MPF reform gathered pace and semi-portability took effect in November 2012, the MPFA issued a code of conduct for intermediaries to safeguard quality. The industry hated the supervisory set-up: the HKMA, the Insurance Authority and the SFC each policing their own slice of intermediaries, risking overlap.

What was “one trade, four regulators”?

One MPF industry, four watchdogs. The MPFA would hand down final disciplinary sanctions while the HKMA, the IA and the SFC did frontline supervision. All 30,000 intermediaries had to answer to at least one of them. Overlap warnings had been raised before, but the MPFA argued the arrangement saved headcount.

What worried the industry?

Being pulled in different directions. Bank, insurance and securities intermediaries at least knew their home regulator, but independent intermediaries and fund agencies (about 90 firms, 4,500 people) were unsure which frontline body covered them, and product and sales applications had grey areas. Split responsibilities across product, sales and supervision, they said, would leave intermediaries lost.

What did the code require?

Records of regulated activities kept at least seven years. The consultation also proposed: no cash from clients, crossed cheques payable only to the registered scheme’s trustee, and recorded calls on risk-mismatch conversations — or post-sale confirmation where nothing was recorded. The package closely mirrored the SFC’s and HKMA’s wealth-product sales rules of the day.