MPF Intermediaries Qualifying Exam flashcards

33 cards. Read the term and the definition here. The deck at the top of this page is optional.

MPF System commencement

The Mandatory Provident Fund Schemes Ordinance (Cap. 485) came into operation in December 2000, establishing the mandatory privately managed defined-contribution retirement savings system in Hong Kong.

Three pillars of retirement protection

Pillar 1 is social security; Pillar 2 is MPF and occupational retirement schemes; Pillar 3 is voluntary private savings and insurance. Together they form Hong Kong's multi-pillar retirement framework.

MPFA role

The Mandatory Provident Fund Schemes Authority is the statutory regulator that registers schemes, approves trustees and intermediaries, and supervises compliance. It does not manage the funds itself.

Mandatory contribution rate

Both employee and employer contribute 5% of relevant income, subject to minimum and maximum relevant income levels. The current maximum monthly relevant income for mandatory contributions is HK$30,000.

Relevant income definition

Relevant income includes wages, salary, leave pay, commission, bonuses and allowances paid in consideration of employment, but excludes certain items such as housing allowances and severance payments.

Employer enrolment deadline

An employer must enrol a new employee within 60 days of the commencement of employment and make the first mandatory contribution within 30 days after the end of the first contribution period.

Immediate vesting

Accrued benefits vest immediately: the employee's and employer's mandatory contributions belong to the member from the date they are paid into the scheme.

Contribution payment deadline

Mandatory contributions must be paid to the trustee within 10 days after the end of the contribution period. Late payment attracts a surcharge and may lead to prosecution.

Retirement age withdrawal

A member may withdraw accrued benefits in a lump sum upon reaching age 65, or may choose instalments or leave the benefits invested in the scheme.

Permanent departure withdrawal

A member may withdraw accrued benefits early on permanent departure from Hong Kong by providing a statutory declaration and evidence of departure to the trustee.

Total incapacity withdrawal

A member may withdraw accrued benefits early on the ground of total incapacity, supported by medical evidence certifying that the member is totally incapable of any employment.

Small balance withdrawal

A member may withdraw accrued benefits if the balance is below the prescribed threshold (currently HK$5,000) and the member has no other MPF benefits.

Personal account

A personal account may be opened by a member who has accrued benefits after leaving employment. The member chooses the trustee and constituent funds, and preservation rules continue to apply.

Portability of benefits

On termination of employment, a member may transfer accrued benefits to a new scheme, to a personal account, or leave them in the previous scheme, subject to the scheme rules.

Transfer processing time

A trustee must process a valid transfer request within the time specified in the General Regulation, generally within 30 days after receiving the request and required documents.

Master trust scheme

A pooled MPF scheme open to all eligible employees, self-employed persons and voluntary members, offering a range of constituent funds under an approved trustee.

Employer-sponsored scheme

An MPF scheme established by a single employer or group for its employees. The employer selects the trustee, and the scheme is not open to the general public.

Industry scheme

An MPF scheme restricted to employees and self-employed persons in the catering and construction industries, including related trades. Membership is limited to those sectors.

ORSO scheme

An occupational retirement scheme regulated under Cap. 426. It may be MPF-exempt if it satisfies the exemption criteria, including minimum benefit requirements.

Default Investment Strategy

A statutory feature in every MPF scheme that applies when a member gives no investment instructions. It comprises the Core Accumulation Fund and the Age 65 Plus Fund.

10% issuer concentration limit

Generally, a constituent fund must not hold more than 10% of its assets in securities of a single issuer, or more than 10% in a single class of securities of an issuer.

Derivatives use restriction

Derivatives may be used for hedging purposes only, not for speculation. The trustee must ensure that their use does not create leverage or disproportionate risk.

Core Accumulation Fund

The higher-risk component of the Default Investment Strategy, with approximately 60% equity exposure, designed for members who are further from retirement age.

Age 65 Plus Fund

The lower-risk component of the Default Investment Strategy, with approximately 20% equity exposure, designed for members who have reached or are near retirement age.

Suitability assessment

Before recommending a product, an intermediary must assess the client's financial situation, investment objectives, risk tolerance and investment horizon, and document the basis for the recommendation.

Know-your-client requirements

KYC requires verifying the client's identity, address and source of funds, and understanding the client's investment experience, knowledge and risk profile.

Disclosure of conflicts

An intermediary must disclose all material information, including fees, charges, risks and conflicts of interest, and must not accept undisclosed benefits that compromise independence.

Seven-year record retention

Intermediaries must keep client onboarding records, suitability assessments, recommendations and transaction records for at least seven years for regulatory inspection.

MPFA disciplinary sanctions

The MPFA may impose public or private reprimand, fines, suspension or revocation of registration, and prohibition from re-registration for breaches of the Ordinance and codes.

Prohibited marketing conduct

Marketing must be accurate, fair and not misleading. Misrepresentation, fraud, unauthorized trading, high-pressure tactics and guaranteed-return claims are prohibited.

Cold calling opt-out

Marketing calls are subject to the opt-out regime under the Personal Data (Privacy) Ordinance. Intermediaries must check the client's opt-out preference before making calls.

Expense ratio disclosure

A constituent fund's expense ratio includes management, trustee, custodian and other ongoing fees, and must be disclosed in the fund's key facts statement.

Past performance warning

Past performance is not a reliable indicator of future performance. The offering document must include a warning to this effect for every constituent fund.