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The Mandatory Provident Fund Schemes (Amendment) (No. 2) Bill 2011, which seeks to enhance the regulation of sales and marketing activities of the Mandatory Provident Fund (MPF) in preparation for the implementation of the Employee Choice Arrangement (ECA), will be gazetted on Friday (December 9).
Explaining the main objective of the Bill today (December 6), a Government spokesman said, "The interests of more than 2.5 million MPF scheme members will be better protected."
He said, "The ECA will enable MPF scheme members to transfer accrued benefits derived from their mandatory contributions during their present employment to a scheme of their own choice at least once a year."
The Mandatory Provident Fund Schemes Authority (MPFA) has estimated that the size of transferable MPF assets will increase from around 39 per cent to around 67 per cent of the total based on the total MPF assets as at the end of August 2011. Sales and marketing activities toward employees are expected to become more intense.
"To address rising public expectations for investor protection after the 2008 global financial crisis, it is prudent to put in place a statutory regulatory regime to enhance scheme members' protection before the implementation of the ECA," the spokesman said.
The proposed regime, which is modelled on the existing administration regime adopted by the MPFA since the inception of the MPF system in 2000, will introduce appropriate improvements to enable efficient use of regulatory resources.
"It will also require minimal adjustments on the part of MPF intermediaries, thus reducing their compliance costs and facilitating early implementation of the ECA," the Government spokesman said. "This will be conducive to more market competition and reduction of fees."
The Bill will also introduce criminal sanctions against the sale and marketing of MPF products by unregistered MPF intermediaries and a full-fledged regulatory regime for MPF intermediaries.
From the operation perspective, the MPFA will be the registration authority and will be empowered to set industry standards for MPF intermediaries through making conduct rules and setting codes and guidelines. The MPFA will also be the authority to impose disciplinary sanctions, to be assisted by front-line regulators (FRs), i.e. the Hong Kong Monetary Authority, the Insurance Authority and the Securities and Futures Commission, in day-to-day conduct supervision and investigation into alleged misconduct of MPF intermediaries who are also the regulatees under these regulators' respective regulatory regimes.
All appeals against the registration and disciplinary decisions of the MPFA will be heard by the independent Mandatory Provident Fund Schemes Appeal Board, which will include members representing the interests of MPF intermediaries and relevant employees. The MPFA will establish a regular liaison mechanism and sign a Memorandum of Understanding with the FRs. The Administration will also establish an independent Process Review Panel to review enforcement procedures and ensure consistency in internal processes taken by the MPFA and FRs.
"We believe these proposed measures will help ensure regulatory consistency and a level playing field," the spokesman said.
Currently, there are more than 30,000 MPF intermediaries registered under the administrative regulatory arrangements that have been in operation since 2000. A two-year transitional period will be provided such that all MPF intermediaries validly registered with the MPFA before the commencement of the statutory regulatory regime will be transferred automatically to the new regime. They will be allowed to carry on MPF intermediary activities during the transitional period before they obtain new registration with the MPFA under the statutory regime. At the same time, they will be subject to the same conduct requirements and sanctions as MPF intermediaries newly registered under the statutory regime.
As a continued effort of the Administration and the MPFA to combat default contributions, the Bill will create a new offence of failure by an employer to comply with a court order for the payment of arrears of MPF mandatory contributions and contribution surcharges. It will also provide for a daily penalty for employers who continue to fail to make MPF mandatory contributions for employees.
The Administration and the MPFA issued a consultation paper in March 2011 on the above legislative proposals. The respondents generally support enhancing the regulation of MPF intermediaries before implementing the ECA and the majority of the respondents did not indicate an objection to the proposed regulatory approach.
"We have taken into account the views of the respondents in formulating the present legislative proposals, including further measures to ensure fairness and consistency in disciplinary decisions and a level playing field," the spokesman added.
The Bill will be introduced into the Legislative Council on December 14, 2011. In preparation for the smooth implementation of the ECA, the MPFA is preparing a new Code of Conduct for MPF intermediaries and plans to release a draft of the Code for consultation with the industry soon. The MPFA will also continue its public education and public relations activities to promote understanding of the ECA. According to the MPFA, if the Bill is enacted before the end of the current legislative session, the ECA can be implemented on November 1, 2012.
Ends/Tuesday, December 6, 2011
Issued at HKT 16:30
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