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MPF Intermediaries Qualifying Exam study materials
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MPF Intermediaries Qualifying Exam practice questions

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Question 1MPF System Overview, Legislation and Regulatory Framework

Under the Mandatory Provident Fund Schemes Ordinance, which body is the statutory regulator responsible for supervising the MPF System?

  1. The Insurance Authority
  2. The Hong Kong Monetary Authority
  3. The Mandatory Provident Fund Schemes Authority Correct answer.
  4. The Securities and Futures Commission

Explanation

The Mandatory Provident Fund Schemes Ordinance establishes the Mandatory Provident Fund Schemes Authority as the statutory body that administers and supervises the MPF System. The other bodies regulate banking, securities, and insurance respectively, and none of them is the MPF regulator.

Question 2MPF System Overview, Legislation and Regulatory Framework

Which employees are generally exempt from mandatory MPF membership on the basis of their employment category?

  1. Employees earning below the minimum relevant income level
  2. Employees who are covered by a recognised occupational retirement scheme Correct answer.
  3. Employees aged 18 to 64 with at least 60 days of continuous employment
  4. Self-employed persons with relevant income above the minimum level

Explanation

Employees who are members of a recognised occupational retirement scheme, or who are covered by statutory pension arrangements such as the civil service pension scheme, are exempt from MPF requirements. The exemption attaches to the coverage of that approved scheme, not to the level of income or age alone.

Question 3MPF System Overview, Legislation and Regulatory Framework

An employer hires a new employee on a 90-day continuous contract. By when must the employer enrol the employee in an MPF scheme?

  1. Within 30 days after the first contribution period ends
  2. By the end of the first full calendar month of employment
  3. On or before the 60th day of employment Correct answer.
  4. Within the first 60 days of employment

Explanation

For an employee with 60 days or more of continuous employment, the employer must enrol the employee in an MPF scheme and arrange for contributions from the start of the employment, with enrolment completed no later than the 60th day. The 60-day limit is a statutory deadline tied to the qualifying employment period.

Question 4MPF System Overview, Legislation and Regulatory Framework

What is the standard mandatory contribution rate for an employee and for an employer under the MPF System, expressed as a percentage of relevant income?

  1. 5% each Correct answer.
  2. 3% each
  3. 10% each
  4. 2.5% each

Explanation

The standard mandatory contribution is 5% of relevant income from the employee and 5% from the employer, subject to the minimum and maximum relevant income levels. These rates apply to monthly-paid employees within the contribution band.

Question 5MPF System Overview, Legislation and Regulatory Framework

For a monthly-paid employee whose relevant income exceeds the maximum relevant income level, how is the mandatory contribution calculated?

  1. On the maximum relevant income level, with the employer and employee each contributing 5% of that cap Correct answer.
  2. On the actual relevant income with no cap
  3. On the minimum relevant income level only
  4. On the excess above the cap only

Explanation

Mandatory contributions are capped: once relevant income exceeds the maximum relevant income level, contributions are calculated on that maximum level rather than on the full income. Both employer and employee contribute 5% of the capped figure.

Question 6MPF System Overview, Legislation and Regulatory Framework

Which statement best describes a Mandatory Provident Fund scheme that is registered as a master trust scheme?

  1. A scheme available only to civil servants
  2. A scheme confined to the employees of a single employer
  3. A scheme open to employees of different employers and to self-employed persons Correct answer.
  4. A scheme that pays benefits only as a lump sum at retirement age 65

Explanation

A master trust scheme is open to employees of multiple employers as well as self-employed persons, pooling members under one approved trustee. Employer-sponsored schemes, by contrast, are generally limited to a single employer and its related companies.

Question 7MPF System Overview, Legislation and Regulatory Framework

Which party holds the statutory duty to ensure that employee contributions are deducted and paid to the approved trustee within the prescribed time?

  1. The approved trustee
  2. The employee
  3. The employer Correct answer.
  4. The MPF Schemes Authority

Explanation

The employer must deduct the employee's contribution from relevant income and remit both employer and employee contributions to the approved trustee within the statutory period. The trustee receives contributions and administers the scheme but does not bear the employer's remittance duty.

Question 8MPF System Overview, Legislation and Regulatory Framework

An employer fails to pay mandatory contributions on time. Which consequence is provided for under the MPF legislation?

  1. The trustee must cover the shortfall from scheme assets
  2. The employer must pay a surcharge and may be subject to financial penalty Correct answer.
  3. The employer is automatically exempt from future contributions
  4. The employee loses the accrued benefit for that period

Explanation

Late or unpaid mandatory contributions attract a statutory surcharge, and the employer may also face financial penalties for non-compliance. The member's accrued benefits are protected and are not forfeited because of the employer's default.

Question 9MPF System Overview, Legislation and Regulatory Framework

Which of the following is a key function of the MPF Schemes Authority in relation to approved trustees?

  1. Approving trustees and monitoring their compliance with statutory standards Correct answer.
  2. Acting as custodian of scheme assets
  3. Guaranteeing investment returns of all MPF funds
  4. Setting the investment return targets for each constituent fund

Explanation

The Authority approves trustees and supervises their ongoing compliance with statutory and regulatory standards, including financial and governance requirements. It does not guarantee returns, set return targets, or hold scheme assets itself.

Question 10MPF System Overview, Legislation and Regulatory Framework

Which characteristic distinguishes a defined contribution scheme from a defined benefit scheme in the MPF context?

  1. Benefits are paid only as a lump sum regardless of scheme type
  2. Benefits depend on a formula linked to final salary and years of service
  3. Benefits are determined by contributions paid plus investment returns, with no guaranteed retirement amount Correct answer.
  4. Benefits are guaranteed by the employer at a fixed monthly amount

Explanation

In a defined contribution scheme, the retirement benefit is the accumulated value of contributions and investment returns, so the member bears investment risk. A defined benefit scheme instead promises a benefit calculated by a formula, typically linked to salary and service.

Question 11MPF System Overview, Legislation and Regulatory Framework

What is the primary purpose of the MPF System as set out in the governing legislation?

  1. To fund healthcare costs in retirement
  2. To replace all occupational retirement schemes in Hong Kong
  3. To provide a universal basic retirement income funded by taxation
  4. To provide retirement savings through mandatory, privately managed contributions Correct answer.

Explanation

The MPF System is a mandatory, privately managed retirement savings system intended to build retirement savings through contributions by employers, employees, and self-employed persons. It is not a tax-funded universal pension and does not cover healthcare costs.

Question 12MPF System Overview, Legislation and Regulatory Framework

Which body issues codes of practice and guidelines that approved trustees must follow in administering MPF schemes?

  1. The Hong Kong Association of Banks
  2. The Mandatory Provident Fund Schemes Authority Correct answer.
  3. The Financial Reporting Council
  4. The Labour Department

Explanation

The Authority issues codes of practice and guidelines under the MPF legislation, setting standards for trustees and other intermediaries. Industry associations and other government departments do not issue binding MPF regulatory guidance.

Question 13MPF System Overview, Legislation and Regulatory Framework

A self-employed person earns relevant income above the minimum level. Which obligation applies?

  1. The person contributes only if they register a company
  2. The person is automatically covered by the spouse's employer scheme
  3. The person must enrol in an MPF scheme and make mandatory contributions Correct answer.
  4. The person is exempt because self-employment is outside the MPF System

Explanation

Self-employed persons with relevant income at or above the minimum level must enrol themselves in an MPF scheme and contribute at the prescribed rate. Self-employment is expressly within the scope of the MPF System.

Question 14MPF System Overview, Legislation and Regulatory Framework

What is the general preservation rule for mandatory contributions accrued in an MPF scheme?

  1. They are preserved until the member reaches retirement age or meets a specified early withdrawal ground Correct answer.
  2. They may be withdrawn at any time on request
  3. They must be transferred to the employer on termination of employment
  4. They are forfeited if the member changes jobs

Explanation

Mandatory contributions are preserved until the member reaches the statutory retirement age or satisfies a permitted early withdrawal ground such as permanent departure or total incapacity. Changing employment does not cause forfeiture; accrued benefits remain with the member.

Question 15MPF System Overview, Legislation and Regulatory Framework

Which of the following is a recognised early withdrawal ground for accrued benefits before retirement age?

  1. Resignation from the current employer
  2. A temporary reduction in salary
  3. Change of MPF scheme provider
  4. Permanent departure from Hong Kong Correct answer.

Explanation

Permanent departure from Hong Kong is one of the statutory grounds on which accrued benefits may be withdrawn before retirement age. Resignation, salary changes, and switching scheme providers do not permit early withdrawal.

Question 16MPF System Overview, Legislation and Regulatory Framework

An employer operates a recognised occupational retirement scheme and wishes to rely on the MPF exemption. What is required?

  1. The scheme must invest entirely in Hong Kong equities
  2. The scheme must be administered by the employer without any trustee
  3. The scheme must be approved by the employees by simple majority vote only
  4. The scheme must be recognised under the MPF legislation and provide benefits no less favourable than the MPF requirements Correct answer.

Explanation

Exemption from MPF requirements is available where the employer operates a recognised occupational retirement scheme that satisfies the statutory recognition criteria, including benefits that are no less favourable than MPF requirements. Employee voting or asset location alone does not create exemption.

Question 17MPF System Overview, Legislation and Regulatory Framework

Which of the following best describes the role of an approved trustee in an MPF scheme?

  1. To sell MPF products to employers as a licensed intermediary
  2. To set the mandatory contribution rate each year
  3. To adjudicate disputes between employers and employees
  4. To hold and safeguard scheme assets and ensure the scheme is administered in members' interests Correct answer.

Explanation

An approved trustee is responsible for the proper administration of the scheme and for safeguarding scheme assets in the interests of members, including appointing custodians and ensuring compliance. Selling products and adjudicating employment disputes fall outside the trustee role.

Question 18MPF System Overview, Legislation and Regulatory Framework

Which statement about the maximum relevant income level for mandatory contributions is accurate?

  1. It is set annually by each approved trustee
  2. It caps the income on which both employer and employee mandatory contributions are calculated Correct answer.
  3. It applies only to employer contributions, not employee contributions
  4. It applies only to self-employed persons

Explanation

The maximum relevant income level is a statutory threshold that caps the income figure used to calculate mandatory contributions for both employer and employee. It is not set by individual trustees and applies across scheme types.

Question 19MPF System Overview, Legislation and Regulatory Framework

An employer deducts employee contributions but fails to remit them to the trustee. What is the legal character of this conduct?

  1. A matter solely for the trustee to resolve internally
  2. A criminal offence, with the employer liable to prosecution and penalty Correct answer.
  3. A minor administrative oversight with no legal consequence
  4. A permitted practice if the employee agrees

Explanation

Failure to remit deducted employee contributions is a serious statutory contravention and can constitute a criminal offence, exposing the employer to prosecution and penalties. Employee consent cannot authorise non-remittance.

Question 20MPF System Overview, Legislation and Regulatory Framework

Which of the following is a principal objective of the regulatory framework governing MPF intermediaries?

  1. To protect scheme members and ensure intermediaries act with proper standards of conduct Correct answer.
  2. To reduce the number of MPF schemes to a single provider
  3. To maximise the investment returns of MPF funds
  4. To guarantee employer contributions are invested in Hong Kong assets

Explanation

The regulatory framework for MPF intermediaries is aimed at protecting scheme members and ensuring that intermediaries meet standards of conduct, competence, and integrity. It does not pursue return maximisation or prescribe a single provider.

Question 21MPF System Overview, Legislation and Regulatory Framework

Which of the following best explains why the MPF System is described as privately managed?

  1. Contributions are held in a single government account
  2. Schemes are administered by approved trustees and other private sector entities under regulatory supervision Correct answer.
  3. The government invests contributions directly on behalf of members
  4. Employers are prohibited from choosing scheme providers

Explanation

Privately managed means scheme administration and investment are carried out by approved trustees and other private entities operating under statutory supervision, rather than by government. The government's role is regulatory, not investment management.

Question 22MPF System Overview, Legislation and Regulatory Framework

An employee has been a member of a recognised occupational retirement scheme that is exempt from MPF. The employee later leaves that employment. What is the general position regarding MPF coverage in the new employment?

  1. The employee may not join an MPF scheme until age 65
  2. The employee must transfer accrued benefits to the new employer
  3. The employee remains permanently exempt from MPF in all future employment
  4. The employee is subject to MPF requirements in the new employment unless another exemption applies Correct answer.

Explanation

Exemption from MPF arises from the coverage of a recognised occupational retirement scheme in a particular employment and does not follow the employee permanently. In new employment, MPF requirements apply unless a fresh exemption applies.

Question 23MPF System Overview, Legislation and Regulatory Framework

Which statement correctly describes the relationship between the MPF Schemes Ordinance and subsidiary legislation made under it?

  1. Subsidiary legislation operates independently and cannot be amended by the Authority
  2. Subsidiary legislation applies only to self-employed persons
  3. Subsidiary legislation overrides the Ordinance where they conflict
  4. Subsidiary legislation sets out detailed operational rules under powers conferred by the Ordinance Correct answer.

Explanation

The Ordinance establishes the framework and confers powers to make subsidiary legislation, which supplies detailed operational rules such as contribution and reporting requirements. Subsidiary legislation derives its authority from the Ordinance and cannot override it.

Question 24MPF System Overview, Legislation and Regulatory Framework

Which of the following is a statutory requirement relating to the records an employer must keep concerning MPF contributions?

  1. Employers are not required to keep any MPF-related records
  2. Employers must send all payroll records to the Authority every month
  3. Employers must keep records of employees' relevant income and contributions for a specified period Correct answer.
  4. Employers may discard contribution records once a monthly payment is made

Explanation

Employers are required to maintain records of employees' relevant income and contributions for a prescribed period so that compliance can be verified. Records cannot be discarded immediately after payment, and routine monthly submission of all payroll records to the Authority is not required.

Question 25MPF Scheme Types, Constituent Funds and Investment Rules

Under the MPF System, which type of scheme is permitted to offer a capital preservation guarantee that is underwritten by an approved insurer and disclosed in the offering document?

  1. A constituent fund classified as a guaranteed fund Correct answer.
  2. A constituent fund classified as an equity fund
  3. A constituent fund classified as an index-tracking fund
  4. A constituent fund classified as a money market fund

Explanation

MPF rules allow a constituent fund to be categorised as a guaranteed fund when a guarantee is provided by an approved insurer or an acceptable guarantor and the guarantee terms are fully disclosed in the offering document. The label reflects the presence of an enforceable guarantee, not the asset class held.

Question 26MPF Scheme Types, Constituent Funds and Investment Rules

A registered MPF scheme wishes to offer a new constituent fund that invests primarily in units of a single collective investment scheme. Which statement best describes the regulatory treatment of such a fund?

  1. It is permitted only if the underlying scheme is authorised by the SFC or is an acceptable overseas scheme and the feeder-level rules are met Correct answer.
  2. It is permitted only if the underlying scheme is listed on the Stock Exchange of Hong Kong
  3. It is prohibited because MPF constituent funds must hold securities directly
  4. It is permitted without restriction because fund-of-fund structures are exempt from investment rules

Explanation

MPF rules permit feeder and fund-of-fund structures where the underlying collective investment scheme is authorised by the SFC or otherwise acceptable, and where concentration, disclosure and liquidity requirements at the feeder level are satisfied. Direct holding of securities is not mandatory.

Question 27MPF Scheme Types, Constituent Funds and Investment Rules

Which of the following best describes the investment scope of a money market constituent fund in an MPF scheme?

  1. It invests mainly in listed equities of companies in the Hang Seng Index
  2. It invests in long-dated government bonds to match pension liabilities
  3. It invests in short-term, high-quality debt securities and deposits with a short weighted average maturity Correct answer.
  4. It invests in unlisted property and infrastructure assets

Explanation

A money market fund is characterised by investment in short-term money market instruments and deposits of high credit quality, with a short weighted average maturity to limit interest rate and credit risk. It does not take substantial equity or long-duration bond exposure.

Question 28MPF Scheme Types, Constituent Funds and Investment Rules

An MPF scheme proposes a constituent fund that will use derivatives for investment purposes rather than solely for hedging. Which requirement applies?

  1. Derivatives may be used freely as long as the fund is labelled a balanced fund
  2. Derivatives are prohibited for all MPF constituent funds
  3. Derivatives may be used only if the fund invests exclusively in derivatives
  4. Derivative use must comply with the applicable limits, be covered by adequate cash or liquid assets, and be disclosed in the offering document Correct answer.

Explanation

MPF rules permit derivative use subject to limits on net exposure, adequate cover for obligations, counterparty and collateral standards, and clear disclosure of the strategy and risks in the offering document. Hedging-only restrictions do not apply where the use is properly authorised and disclosed.

Question 29MPF Scheme Types, Constituent Funds and Investment Rules

Which statement correctly describes the borrowing restriction applicable to an MPF constituent fund?

  1. Borrowing is permitted only on a temporary basis to meet redemption or expenses, within a specified limit of the fund's net asset value Correct answer.
  2. Borrowing is permitted without limit to enhance investment returns
  3. Borrowing is permitted only for acquiring additional equities
  4. Borrowing is prohibited in all circumstances including temporary liquidity needs

Explanation

MPF rules restrict borrowing to temporary purposes such as meeting redemptions or expenses, capped at a stated percentage of net asset value. Borrowing to leverage investment returns is not permitted.

Question 30MPF Scheme Types, Constituent Funds and Investment Rules

A constituent fund invests in a single issuer's debt securities that exceed the usual 10% concentration limit. Which circumstance could justify this?

  1. The fund has fewer than 100 members
  2. The issuer has a high credit rating from a major agency
  3. The securities are issued or guaranteed by a government or a specified supranational body and the offering document discloses the higher limit Correct answer.
  4. The fund is marketed only to self-employed persons

Explanation

MPF concentration limits generally cap exposure to a single issuer at 10% of net asset value, but securities issued or guaranteed by governments or specified supranational entities may be subject to a higher permitted limit, provided this is disclosed. Credit rating alone does not lift the limit.

Question 31MPF Scheme Types, Constituent Funds and Investment Rules

Which of the following is a permitted investment for an MPF constituent fund under the general investment rules?

  1. Unlisted shares of a private start-up company
  2. Shares listed on a recognised stock exchange Correct answer.
  3. Commodities held directly in physical form
  4. Artworks held as collectibles

Explanation

MPF constituent funds may invest in securities listed on recognised stock exchanges and other eligible investments defined in the rules. Direct holdings of physical commodities and collectibles fall outside the eligible investment scope.

Question 32MPF Scheme Types, Constituent Funds and Investment Rules

An MPF scheme operator wants to launch a guaranteed fund where the guarantee covers accrued benefits at a specified rate. Which party must provide or back that guarantee?

  1. The fund's investment manager using its own capital
  2. An approved insurer or other acceptable guarantor meeting the regulator's requirements Correct answer.
  3. The scheme's trustee acting alone
  4. The employer sponsoring the scheme

Explanation

A guaranteed fund requires the guarantee to be provided by an approved insurer or another guarantor acceptable to the regulator, with the guarantee terms disclosed. The trustee, employer or investment manager does not ordinarily serve as the guarantor in this context.

Question 33MPF Scheme Types, Constituent Funds and Investment Rules

Which best describes the difference between a master trust scheme and an industry scheme under the MPF System?

  1. A master trust scheme is run by the Government, while an industry scheme is run by an insurer
  2. A master trust scheme invests only in equities, while an industry scheme invests only in bonds
  3. A master trust scheme is open to employees of any participating employer, while an industry scheme is established for employees in a particular industry Correct answer.
  4. A master trust scheme is open only to self-employed persons, while an industry scheme is open only to civil servants

Explanation

Master trust schemes are open to employees of any employer that chooses to participate, and to self-employed persons. Industry schemes are set up for employees in specific industries, such as catering and construction, to address labour mobility.

Question 34MPF Scheme Types, Constituent Funds and Investment Rules

A constituent fund's investment policy states it will hold between 40% and 60% in equities with the remainder in bonds. How should this fund be classified?

  1. As a money market fund
  2. As a guaranteed fund
  3. As a mixed asset or balanced fund Correct answer.
  4. As a pure equity fund

Explanation

A fund that allocates across both equities and bonds within stated ranges is a mixed asset or balanced fund. The presence of a substantial bond allocation distinguishes it from a pure equity fund.

Question 35MPF Scheme Types, Constituent Funds and Investment Rules

Which requirement applies to an index-tracking constituent fund that seeks to replicate the performance of a designated index?

  1. The index must be sufficiently diversified and the fund must disclose tracking error, replication method and the index provider Correct answer.
  2. The fund may track an index comprising a single issuer's securities without limit
  3. The fund must guarantee a return equal to the index
  4. The fund must hold only constituent securities of the index with no cash

Explanation

Index-tracking funds must reference a diversified and acceptable index and disclose the replication strategy, expected tracking error and index provider details. Concentration limits still apply, so a single-issuer index would not be acceptable.

Question 36MPF Scheme Types, Constituent Funds and Investment Rules

Which statement is correct about the currency exposure rules for MPF constituent funds?

  1. Currency hedging is prohibited for MPF funds
  2. A fund's currency exposure must be consistent with its disclosed investment policy and any hedging must be disclosed Correct answer.
  3. All constituent funds must be denominated in Hong Kong dollars only
  4. A fund may change its currency policy without informing scheme members

Explanation

MPF funds may be denominated in various currencies, but the currency exposure and any hedging policy must be consistent with the disclosed investment policy and communicated to members. Changes to material investment policy require disclosure.

Question 37MPF Scheme Types, Constituent Funds and Investment Rules

A constituent fund wishes to lend its securities to generate additional income. Which condition must be satisfied?

  1. Securities lending is permitted only if all proceeds are paid to the employer
  2. Securities lending must be conducted on terms acceptable to the regulator, with adequate collateral and disclosure of the arrangement Correct answer.
  3. Securities lending requires no collateral because the borrower is a bank
  4. Securities lending is prohibited for all MPF funds

Explanation

Where securities lending is permitted, it must be conducted on acceptable terms with adequate collateral, appropriate risk controls and disclosure in the offering document. The proceeds and risks must be borne by the fund, not the employer.

Question 38MPF Scheme Types, Constituent Funds and Investment Rules

Which of the following best describes the role of a constituent fund in the structure of an MPF scheme?

  1. It is the trustee company that holds scheme assets
  2. It is an investment pool within the scheme in which members direct their accrued benefits to be invested Correct answer.
  3. It is the insurer that provides the scheme's guarantee
  4. It is the regulator that authorises the scheme

Explanation

A constituent fund is an investment vehicle within an MPF scheme, and members choose among the scheme's constituent funds to invest their accrued benefits. The trustee, guarantor and regulator perform different roles.

Question 39MPF Scheme Types, Constituent Funds and Investment Rules

An MPF constituent fund invests in an overseas collective investment scheme that is not authorised by the SFC. Under what condition may this be acceptable?

  1. The scheme is managed by a bank
  2. The scheme has a long track record of positive returns
  3. The scheme has assets above a specified threshold
  4. The scheme is regulated in a recognised jurisdiction, meets comparable investor protection standards, and the arrangement is permitted under the applicable rules Correct answer.

Explanation

Investment in non-SFC-authorised schemes may be permitted where the scheme is regulated in a recognised jurisdiction with comparable standards and the arrangement satisfies the applicable eligibility rules. Asset size, manager type or past returns alone are not sufficient.

Question 40MPF Scheme Types, Constituent Funds and Investment Rules

Which statement correctly describes the treatment of cash and deposits in an MPF constituent fund?

  1. Cash holdings are prohibited because they do not generate returns
  2. Cash and deposits may be held for liquidity and ancillary purposes, subject to limits and counterparty standards Correct answer.
  3. A constituent fund must be fully invested at all times with zero cash
  4. Cash must be held only in the form of physical currency

Explanation

MPF constituent funds may hold cash and deposits for liquidity, pending investment and expense purposes, subject to limits and standards on counterparties and concentration. A fund is not required to be fully invested at all times.

Question 41MPF Scheme Types, Constituent Funds and Investment Rules

A fund manager of an MPF constituent fund wants to invest in a newly issued security that is expected to be listed soon. Which approach is consistent with the investment rules?

  1. Investment is permitted only if the issuer is a scheme member's employer
  2. Investment may be made where the security meets the eligibility criteria for listing or is otherwise permitted, with appropriate disclosure Correct answer.
  3. Investment is permitted only after the security has traded for one year
  4. Investment may proceed freely because the security will certainly be listed

Explanation

MPF rules permit investment in securities that satisfy eligibility criteria, including securities expected to be listed where the applicable conditions are met, and require appropriate disclosure. Certainty of future listing is not a substitute for meeting the rules.

Question 42MPF Scheme Types, Constituent Funds and Investment Rules

Which of the following best describes how the 10% single-issuer concentration limit is generally measured for an MPF constituent fund?

  1. As a percentage of the total assets of all MPF schemes combined
  2. As a percentage of the fund's net asset value attributable to securities of that issuer Correct answer.
  3. As a percentage of the trustee company's share capital
  4. As a percentage of the scheme member's accrued benefits

Explanation

The single-issuer concentration limit is generally measured against the net asset value of the relevant constituent fund. It is not measured against aggregate industry assets, member benefits or trustee capital.

Question 43MPF Scheme Types, Constituent Funds and Investment Rules

Which statement is correct regarding the investment of MPF assets in a fund managed by an affiliate of the scheme's investment manager?

  1. Such investment is permitted only if the affiliate waives all fees
  2. Such investment requires no disclosure because both parties are regulated
  3. Such investment is subject to conflict of interest controls, disclosure and any applicable limits on related-party transactions Correct answer.
  4. Such investment is automatically prohibited in all cases

Explanation

Investment in affiliated funds is not automatically prohibited but is subject to conflict of interest controls, disclosure to members, and limits on related-party or connected transactions. Fee waivers are not the governing condition.

Question 44MPF Scheme Types, Constituent Funds and Investment Rules

Which of the following is the primary purpose of the investment restrictions and limits applicable to MPF constituent funds?

  1. To prevent members from switching between funds
  2. To maximise the investment returns of the trustee company
  3. To manage risk and protect scheme members' accrued benefits through diversification and liquidity controls Correct answer.
  4. To ensure all funds produce identical returns

Explanation

The investment restrictions and limits exist to control risk and protect members' accrued benefits, principally through diversification, liquidity and eligibility requirements. They are not designed to equalise returns or restrict switching.

Question 45MPF Scheme Types, Constituent Funds and Investment Rules

An MPF constituent fund holds a large position in a single counterparty for over-the-counter derivative transactions. Which control is most relevant?

  1. A requirement that the counterparty be a scheme member's employer
  2. A requirement that all derivatives be exchange-traded
  3. Counterparty exposure limits and collateral requirements to mitigate default risk Correct answer.
  4. A prohibition on any OTC derivative use

Explanation

For OTC derivatives, the key controls are counterparty exposure limits, collateral standards and credit quality requirements to mitigate default risk. OTC derivatives are not prohibited outright, and exchange trading is not mandatory in all cases.

Question 46MPF Scheme Types, Constituent Funds and Investment Rules

Which statement correctly describes the requirement for an MPF constituent fund's investment policy regarding valuation of assets?

  1. Assets must be valued in accordance with the scheme's valuation policy, which must be consistent with applicable accounting and regulatory standards Correct answer.
  2. Assets must be valued only at the end of each calendar year
  3. Assets may be valued at the discretion of the investment manager without a documented policy
  4. Assets must be valued at their original purchase price at all times

Explanation

MPF schemes must have a documented valuation policy consistent with applicable accounting and regulatory standards, and assets are valued accordingly, typically at least daily for pricing. Discretion without policy or historical cost valuation is not acceptable.

Question 47MPF Scheme Types, Constituent Funds and Investment Rules

A scheme proposes to add a new constituent fund with a higher-risk strategy. Which step is required before members can invest in it?

  1. The fund requires approval only from the employer sponsoring the scheme
  2. The fund may be launched immediately because members bear investment risk
  3. The fund requires approval only if it invests in equities
  4. The fund must be approved under the applicable process and its offering document and risks must be disclosed to members Correct answer.

Explanation

A new constituent fund must go through the applicable approval or authorisation process, and its offering document, investment policy and risks must be disclosed to members. Member risk-bearing does not remove the approval requirement.

Question 48MPF Scheme Types, Constituent Funds and Investment Rules

Which statement best describes the treatment of accrued benefits when a scheme member chooses to invest in a guaranteed fund versus a non-guaranteed fund?

  1. In both cases the capital is guaranteed by the employer
  2. In a non-guaranteed fund the capital is guaranteed by the regulator
  3. In a guaranteed fund the guarantee terms and conditions apply as disclosed, while in a non-guaranteed fund benefits depend on investment performance Correct answer.
  4. In both cases the capital is guaranteed by the trustee

Explanation

A guaranteed fund provides benefits subject to the guarantee terms disclosed in the offering document, whereas a non-guaranteed fund's benefits depend on investment performance and may fall as well as rise. The trustee, employer and regulator do not guarantee non-guaranteed fund capital.

Question 49Accrual, Vesting, Contributions and Mandatory Contributions

Under the MPF System, what is the maximum relevant income level used each month to calculate mandatory contributions for an employee?

  1. HK$30,000 Correct answer.
  2. HK$50,000
  3. HK$20,000
  4. HK$100,000

Explanation

Mandatory contributions are calculated on relevant income subject to a monthly maximum of HK$30,000 (or HK$360,000 annually). Income above that ceiling does not attract mandatory contributions, though voluntary contributions may still be made.

Question 50Accrual, Vesting, Contributions and Mandatory Contributions

What is the minimum relevant income level per month below which an employee is not required to make mandatory contributions (but the employer still must)?

  1. HK$5,000
  2. HK$10,000
  3. HK$7,100 Correct answer.
  4. HK$15,000

Explanation

Where an employee's relevant income is below HK$7,100 per month, the employee is exempt from mandatory contributions, but the employer must still contribute. The employer's obligation is not removed by the employee's low income.