Intermediary Conduct, Suitability, Disclosure and Client Onboarding
What this domain tests
Who may act as an MPF intermediary, what must happen before a recommendation is made, and how suitability and disclosure are documented.
Registration and roles
Principal intermediaries are companies (SFC-licensed corporations, registered institutions such as banks, or insurance brokers) registered with the MPFA. Subsidiary intermediaries are individuals registered through a principal. Regulated MPF activities cover selling and marketing schemes, advising on scheme or fund selection, and advising on or assisting with transfers of accrued benefits. Acting outside your registered activity type, or working with unregistered persons, is a breach.
The onboarding and suitability process
- Know your client: identity, age, financial situation, investment experience, horizon and risk tolerance, plus existing MPF holdings and any ORSO coverage.
- Risk profiling: a documented questionnaire producing a risk score.
- Suitability: the recommendation must match the client's risk profile, horizon and circumstances, and the rationale must be recorded.
- Disclosure: provide the scheme brochure and key facts, explain fees and charges and the commission the intermediary receives, and disclose conflicts of interest.
- Documentation: a written client agreement and retention of all records for the required period.
Intermediaries must not handle client money and must not accept cash or cheques payable to themselves; contributions go to the trustee or scheme.
Worked example
An adviser meets a 57-year-old first-time member with a modest balance, no investment experience and a stated wish to protect capital. The adviser recommends a single-market emerging-equity fund because it topped the performance table last year. This fails suitability: the risk profile, the short horizon to 65 and the concentration all point to a lower-risk, diversified option, and past performance is not a suitability justification. The client file must show the reasoning, not just a signed form.
Traps that cost marks
- Treating a signed risk questionnaire as sufficient proof of suitability.
- Recommending on the basis of commission or recent performance.
- Assuming an SFC or insurance licence covers MPF activity without MPFA registration.
- Accepting a cheque made out to the intermediary rather than the trustee.
- Failing to disclose the commission earned on the recommended scheme.