Enhanced Regulation of Mandatory Provident Fund Intermediaries

八月 21, 2011
Joe Chan

Q 1 . What is the outcome of the consultation on the legislative proposals on the
regulation of MPF intermediaries?  
A1. The Consultation Paper was published in  end March 2011.  As at 28 July
2011, we have received a total of 13 written submissions from various
organizations.  Respondents include  industry groups, labour unions, the
Consumer Council and professional bodies.  There is general support for
enhancing the regulation of Mandatory Provident Fund (“MPF”)
intermediaries before implementation of the Employment Choice Arrangement
(“ECA”) and the majority of respondents did not indicate disagreement with
the proposal that the statutory regulatory regime be modelled on the existing
administrative regulatory arrangements.  The views received during the
consultation period and our detailed  responses have been posted on the
websites of the Financial Services and the Treasury Bureau and the Mandatory
Provident Fund Schemes Authority (“MPFA”).
In light of the importance of enforcement consistency, we suggest enhancing
the legislative proposals in different aspects and have provided further details
regarding the content of the legislative proposals.  We are now working on
the drafting of the legislation.  One of the measures to ensure regulatory
consistency is to vest with the MPFA  all the disciplinary powers (including
reprimand, fines, suspension and revocation of registration) to strengthen the
role of the MPFA as the lead regulator of all MPF intermediaries.  The
frontline regulators (“FRs”) will participate actively in the disciplinary process
to ensure regulatory consistency.  

 

Q2. Why is the MPFA not taking up all regulatory work?
A.2 Currently, financial institutions operate in various sectors which involve
selling many different products.  To accommodate market development,
supervision should adopt an integrated approach.   The existing “integrated”
approach adopted in Hong Kong taking into account both the business of the
institutions and the industry, and has been functioning well.  It is able to meet
the actual needs of the market.  From  a vertical perspective, the sector to
which a financial institution belongs determines the institution’s regulatory
authority, while from the horizontal point of view, products of the same type
will be subject to the supervision of  the same regulator regardless of the
financial institutions.  Under the “integrated” approach, the regulatory
requirements applicable to industry and businesses would complement each
other, and would avoid fundamental change to the existing regulatory regime. 
It can facilitate MPF intermediaries adapt the new regime, and is considered to
be the most effective way to facilitate industry compliance and the early
implementation of the ECA.

 

Q 3 . How to ensure consistency in regulation and a level playing field?
A.3 To further ensure regulatory consistency, we will modify the proposal such
that all disciplinary powers would  be vested with the MPFA (including
reprimand, fines, suspension and revocation of registration and prohibition
from applying for registration) with  active participation of FRs in the
disciplinary process.  In actual operation, the MPFA will be assisted by the
Hong Kong Monetary Authority (“HKMA”), the Insurance Authority (“IA”)
and the Securities and Futures Commission (“SFC”), which, in recognition of
their distinct role as the primary and lead regulator for their own sectors, will
perform the role of the frontline regulators for MPF intermediaries from their
own sectors.  Before making any disciplinary decision, the MPFA will take
into account the investigation results and recommendations of the FRs and
institute process for ensuring procedural fairness for the intermediaries
concerned, including the opportunity of being heard before imposing any
disciplinary action.  We believe this modified proposal will further ensure
fairness and consistency in disciplinary decisions and create a level playing
field.
The relevant measures to ensure regulatory consistency suggested in the
original proposal will be kept, e.g. – 
(a) the MPFA will be the authority to register MPF intermediaries;
(b)  the MPFA will be the sole standard-setter and be empowered to make
rules, after consultation with FRs, on statutory conduct requirements. 
It will also be empowered to issue codes/guidelines for the purpose of
giving guidance on compliance with the statutory conduct
requirements;
(c)  the legislation will delineate clearly the respective powers and
functions of the MPFA and the FRs, and arrangements will be agreed
between the MPFA and the FRs on this basis through, for example, the
signing of a Memorandum of Understanding among them;
(d)  all appeals against registration and disciplinary decisions with regard to
MPF intermediaries will be handled by a single independent appellate
body;
(e)  the MPFA will establish a regular liaison mechanism with participation
of all FRs to enhance communication and exchange of views on the
making of codes, guidelines and rules on conduct requirements,
enforcement principles and other issues of mutual concern over the
regulation of MPF intermediaries; and
(f)  an independent Process Review Panel will be established to review the
enforcement procedures of the MPFA and the FRs to ensure, among
other things, consistent internal process on MPF enforcement among
the FRs and within the MPFA.

 

Q 4 . What would be the role of the self-regulatory organizations (SROs) of the
insurance sector under the new regulatory regime and after the
establishment of the independent Insurance Authority?
A4. The proposed independent Insurance Authority will become the frontline
regulator of MPF intermediaries from the insurance sector.  Before its
establishment, the Office of the Commissioner of Insurance will be
responsible for the frontline work.  Currently, the MPFA has kept a register of
MPF intermediaries, including members of SROs of the insurance sector.  In
future, the MPFA, Insurance Authority and self-regulatory organizations will
discuss the transitional arrangements. The MPFA will further consult the
industry, including self-regulatory organizations, in preparing the new Code of
Conduct for MPF Intermediaries.  We believe that under the new regulatory
regime, self-regulatory organizations will continue to play its role as an
industry body to represent the rights of its members and to organize training
courses and other publicity programmes for the industry. 

 

Q5. Can the pre-existing MPF intermediaries continue to sell MPF products? 
What are the details of the transitional arrangement?
A5. The Administration and the MPFA have proposed to provide a two-year
transitional period after the implementation of the new regulatory regime. 
MPF intermediaries already validly registered with the MPFA before
commencement of the new regulatory regime will be automatically transferred
to the new regime.  If they wish to continue to carry on MPF sales and
marketing activities after the transitional period, they will need to complete
application procedures with the MPFA before the expiry of the transition
period.  In order to protect the interests of MPF  scheme members, all MPF
intermediaries should comply with the conduct requirements under the new
regulatory regime during the transitional period, otherwise they may be subject
to disciplinary actions.

Q6. Will the MPFA impose new examination or Continuing Professional
Development (“CPD”) requirements on pre-existing intermediaries
during the transitional period?
A6. All along, the MPFA is responsible for reviewing the  registration criteria for
MPF intermediaries from time to time in the light of market development and
public expectation and making appropriate amendments.  At present, the
MPFA has no plan to impose new examination or CPD requirements through
the introduction of the statutory regulatory regime and will consult before
putting forth any new proposals. 

Q7. Will additional conduct requirement be imposed on MPF intermediaries?
A7. The MPFA will issue a code on the conduct requirements for compliance by
MPF intermediaries.  The MPFA plans to release the draft code of conduct in
the fourth quarter this year for further consultation with the industry.
Q8. What is the level of the registration fee?  
A8. The MPFA will be empowered to collect registration fee from MPF
intermediaries under the legislative proposals, which is a common
arrangement in legislation.  The fee will be prescribed through subsidiary
legislation.  Initially, the MPFA plans to waive the fee for the initial years of
implementation of the statutory regulatory regime.  The MPFA has made
clear that if fee is to be collected in future, the level will only be determined on
a cost-recovery basis.
Q9. What is the latest legislative timetable?  
A9. The Administration and the MPFA are making full steam on the drafting of the
legislation.  We aim to introduce the Bill into LegCo in Q4 this year with a
view to completing the legislative process within the current LegCo term such
that the MPFA may implement the ECA in the second half of 2012.
Q10. When can the ECA be implemented?
A10. The MPFA is carrying out the relevant preparatory work for the
implementation of the ECA, such as establishing an electronic platform to
process the transfers of MPF benefits, formulating operational policies, setting
up a personal account register, providing training to MPF intermediaries and
enhancing education of scheme members.
The MPFA has also set up a steering group and project team to discuss the
implementation details and to monitor  the progress.  It will determine the
timetable for the implementation of the ECA after the completion of the
legislative process in light of the actual preparatory progress.  The present
target is to implement the ECA in the second half of 2012 once the Bill is
passed in the 2011-12 legislative session.

Q11.  How to access the consultation conclusions?
A 11 . The consultation conclusions have been uploaded to the websites of the
Financial Services and the Treasury Bureau at
http://www.fstb.gov.hk/fsb/ppr/consult/mpf_conclusion.htm and the MPFA at
http://www.mpfa.org.hk/english/quicklinks/quicklinks_cp/quicklinks_cp.html.

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