The nuts and bolts of MPF reform: how the intermediary code ran “one trade, four regulators”

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

MPF reform went beyond semi-portability. From November 2012, the MPFA issued a code of conduct for intermediaries, bringing 30,000 of them under a new supervisory framework — one the industry itself called confusing: “one trade, four regulators”.

What did the code mandate?

Records of regulated activities kept at least seven years, with risk-mismatch conversations recorded. The consultation also proposed: no cash accepted from clients; crossed cheques payable only to the registered scheme’s trustee; and post-sale confirmation calls where no recording existed. The package closely mirrored the SFC’s and HKMA’s wealth-product sales rules.

Why did the industry call the guidance unclear?

Because nobody knew which regulator was theirs. Bank, insurance and securities intermediaries at least knew their frontline body, but the roughly 90 independent fund agencies and 4,500 intermediaries were unsure where they belonged — and product and sales applications had grey areas.

What improvements were suggested?

Retirement-planning training for intermediaries. Some argued that, facing 2.58 million employees, intermediaries needed retirement-planning competence on top of supervision before advising anyone — lest members’ retirement interests suffer.