Three unanswered questions as Hong Kong readied its MPF intermediary rules

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

More than two million employees were counting down to November 2012, when the Employee Choice Arrangement — “semi-portability” — would let workers transfer their own MPF contributions once a year. The government was rushing legislation to regulate MPF intermediaries, but the Hong Kong Trustees’ Association warned that officials had never consulted the industry on a sales code for frontline staff, leaving three big questions unanswered and the trade fearing it could not meet the new requirements in time.

What worried the industry about the new intermediary rules?

The industry’s biggest worry was the missing detail on sales conduct. Even though the MPFA would take charge of regulating intermediaries, officials had not consulted on whether sales standards would be uniform across intermediaries, whether bank- or insurer-style practices applied, or whether trustees must stop members switching into funds that mismatched their risk profile — leaving the trade with no answers.

The association’s newly appointed chairwoman, who also headed its retirement schemes committee, laid out the three grey areas in an interview:

1. No uniform sales standard. The MPFA would oversee all intermediaries, but whether a single standard would govern different intermediaries’ sales practices had never been put to consultation.
2. Bank or insurer practice? Her own firm, BCT, fell under the SFC’s supervision — it was unclear whether its MPF sales should follow banking or insurance practice, and the industry had no consensus.
3. Stop the mismatched switch, or execute it? When an employed member switches portfolios, should the risk assessment count? If a member rated low-risk switches everything online into an all-equity fund, must the trustee intervene? Yet failing to execute a switching instruction promptly invites complaints and compensation claims — a genuine dilemma.

Time was brutally short: even if the Legislative Council passed the intermediary bill before the summer recess, the market would have only three months to implement the Employee Choice Arrangement. The MPF education hub explains how the system works.