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The Government announced the Consultation Conclusions on the legislative proposals to enhance regulation of Mandatory Provident Fund (MPF) intermediaries and issued a paper to the Legislative Council (LegCo) Panel on Financial Affairs today (July 29) to set out the detailed proposals. The legislative proposals seek to establish a statutory regulatory framework for MPF intermediaries before the implementation of the Employee Choice Arrangement (ECA) to better protect the interests of over 2.5 million MPF scheme members.
A spokesman for the Financial Services and the Treasury Bureau said, "The Government and the Mandatory Provident Fund Schemes Authority (MPFA) are proceeding with the drafting of the legislation. We aim to introduce the Bill into the LegCo in the fourth quarter of this year, with a view to completing the legislative process within the current LegCo term so that the ECA may commence in the second half of next year.
"At present, the MPFA regulates MPF intermediaries through an administrative regulatory regime. The legislative proposals are modelled on the existing administrative arrangements with appropriate improvements, including the introduction of sanctions against the sales and marketing of MPF products by unregistered MPF intermediaries, and empowering regulators to conduct inspection and investigation and take disciplinary action to ensure compliance by intermediaries. We believe that the legislative proposals would better protect the scheme members' interests and the proposed statutory regime, which is modelled on the current administrative arrangements, would facilitate MPF intermediaries to adjust to the new regime and the early implementation of the ECA."
The Government and the MPFA commenced the consultation with the release of a panel paper entitled "Enhanced Regulation of MPF Intermediaries" on March 28, 2011. A total of 13 written submissions have been received from various groups as at July 28. The spokesman said that the majority of the respondents support the introduction of a statutory regime to regulate the sales and marketing of MPF products before the implementation of the ECA and did not indicate disagreement with the proposal that the statutory regulatory regime be modelled on the existing administrative arrangements. The Government and the MPFA would consider the comments received in drafting the legislation.
"Taking into account the views of the respondents, the Government and the MPFA propose to modify some of the legislative proposals to further ensure regulatory consistency. In particular, we propose to vest in the MPFA all disciplinary powers (including reprimand, fines, suspension and revocation of registration) whilst front-line regulators (FRs) would participate actively in the disciplinary process to ensure regulatory consistency," he said.
In actual operation, the MPFA would be assisted by the Hong Kong Monetary Authority, the Insurance Authority and the Securities and Futures Commission, which, in recognition of their distinct roles as the primary and lead regulator for their own sectors, would perform the role of the FRs for MPF intermediaries from their own sectors, including day-to-day inspection and investigation of misconduct. Before making any disciplinary decision, the MPFA would take into account the investigation results and recommendations of the FRs and institute the 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 spokesman said.
The other measures to ensure regulatory consistency in the consultation proposals will be retained. These include empowering the MPFA as the sole standard setter; having all appeals against registration and disciplinary decisions handled by an independent statutory appellate body; the establishment of a regular liaison mechanism between the MPFA and the FRs; and the setting up of a mechanism to delineate the working relationship between the MPFA and the FRs by means of, for example, the signing of a Memorandum of Understanding.
"To further protect the interests of scheme members, we have drawn reference to the existing arrangement under the Securities and Futures Ordinance and propose that the MPFA should be empowered to impose a prohibition against application by a person whose registration as an MPF intermediary has been revoked for re-registration within a specified period. We would also examine the merits of empowering the MPFA to negotiate an alternative arrangement with the MPF intermediaries concerned in misconduct cases and take action in lieu of, or in addition to, the disciplinary sanctions where appropriate, having regard to the public interests or the interests of maintaining public confidence in the operation of the MPF schemes. Given their roles, the FRs would take part in this process with the MPFA," the spokesman said.
In preparation for the statutory regulatory regime for smooth implementation of the ECA, the MPFA is preparing a new Code of Conduct. It plans to release a draft of the Code in the fourth quarter of this year for consultation with the industry.
At present, about 29,000 MPF intermediaries have registered with the MPFA for carrying out MPF sales and marketing activities. The Government and the MPFA proposed in the consultation paper issued in March to provide a transitional period of two years for pre-existing MPF intermediaries to ensure their smooth transition to the new statutory regulatory regime. Most respondents welcome this proposal, under which all MPF intermediaries already validly registered with the MPFA before commencement of the new regulatory regime would be automatically transferred to the new regime. If they wish to continue to carry on the sales and marketing of MPF products after the transitional period, they would have to complete the application procedures with the MPFA before the end of the transitional period. For protection of scheme members' interests, the pre-existing MPF intermediaries will have to continue to fulfil the on-going Continuing Professional Development requirements and comply with the conduct requirements during the transitional period.
In addition, the respondents who commented on another proposal in the consultation paper on the establishment of an electronic transfer system (E-platform) by the MPFA supported it for processing the transfer of accrued benefits. The proposed E-platform aims to facilitate the transfer of accrued benefits by ensuring the accuracy, shortening the processing time and minimising the costs associated with transfer. In addition, the respondents also support the legislative proposal to further enhance the deterrent against default of contributions by employers for better protection of scheme members' interests.
After the issuance of the consultation paper, the Government and the MPFA consulted members of the LegCo Panel on Financial Affairs on the legislative proposals at a meeting of the Panel on April 4, and proactively invited further comments from the industry and stakeholders, including the Consumer Council. Three briefings were held for the industry. Further details of these legislative proposals are provided in the Consultation Conclusions and the paper to the Panel, which were issued by the Government and the MPFA today.
The Consultation Conclusions, including the responses from the Government and the MPFA to the comments received, have been uploaded onto the websites of the Financial Services and the Treasury Bureau (www.fstb.gov.hk/fsb) and the MPFA (www.mpfa.org.hk). Further comments on the detailed proposals should be sent to the Financial Services and the Treasury Bureau by mail (18/F, Tower I, Admiralty Centre, 18 Harcourt Road, Hong Kong), by email (enq@fstb.gov.hk) or by fax (2529 1663) on or before August 31, 2011.
Ends/Friday, July 29, 2011
Issued at HKT 19:56
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