Tighter rules for MPF intermediaries ahead of the Employee Choice Arrangement

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

Once the MPF Employee Choice Arrangement — better known as the “semi-portability” reform — takes effect, sales activity between intermediaries and scheme members will become more direct and frequent, and competition will intensify. The MPFA therefore planned to legislate tighter conduct rules for MPF intermediaries first, before implementing the arrangement. An AXA Hong Kong sales executive set out the key points in a February 2012 column.

What do MPF intermediaries do?

MPF intermediaries mainly sell MPF schemes; most are employed in banking, insurance or securities, while a minority are independent intermediaries engaged by one or more trustees to market their schemes. Since the system’s launch, trustees have invested in training frontline staff, building their expertise in scheme knowledge, fund awareness, sales technique, conduct and regulation.

What are the highlights of the tougher regulation?

The government tabled a bill in the Legislative Council to ban unregistered intermediaries from selling regulated MPF products and to create a statutory regime for registered intermediaries; if passed, serious misconduct could draw reprimands, fines, suspension or revocation of registration — and a ban on reapplying. All disciplinary powers would sit with the MPFA to protect members’ interests.

Who handles frontline supervision?

The bill keeps the existing framework: intermediaries remain supervised by the regulator of their home sector — the HKMA for banking, the Office of the Commissioner of Insurance for insurance, and the SFC for securities — assisting the MPFA, which would also issue a code of conduct promoting proper sales practices. Frontline regulators take part in the disciplinary process as well.