Sales Practices, Marketing and Prohibited Conduct
What this domain tests
How MPF products may be promoted and sold, and where acceptable persuasion ends and prohibited conduct begins.
Permitted practice
Marketing must be accurate, balanced and not misleading. Materials should identify the scheme and fund, state the investment policy and risks, and disclose fees. Performance figures must carry the required caveats about past performance and must not be framed to imply a forecast. The trustee approves materials relating to its own scheme, and the MPFA can require material to be withdrawn.
Prohibited conduct
- Misrepresentation: false or misleading statements about returns, guarantees, fees, the trustee's standing or the role of the MPFA, including any implication of MPFA approval or endorsement.
- Guaranteeing or projecting returns as certain, or describing a non-guaranteed fund as safe or capital-protected.
- Inducements: offering or accepting benefits that could bias advice, and failing to disclose commission or other monetary benefits.
- Churning: pressing members into repeated ECA transfers or switches to generate commission without a suitability rationale.
- Unregistered activity: unregistered persons arranging meetings, explaining products or closing sales, and referral arrangements that go beyond a simple introduction.
- High-pressure or doorstep tactics that mislead the client about the nature of the meeting.
Worked example
An intermediary's leaflet states that its flagship fund 'guarantees 8% a year and is approved by the MPFA'. Both limbs are prohibited: the fund is not guaranteed, so the statement is a misrepresentation, and the MPFA reference falsely implies official endorsement. A small-print disclaimer at the foot of the page does not cure a headline claim that is false.
Traps that cost marks
- Assuming only written statements can breach the rules; oral misstatements are caught too.
- Thinking the MPFA pre-approves every advertisement; it does not.
- Believing disclosure of commission excuses an unsuitable recommendation; it does not.
- Overlooking that a referral fee paid to an unregistered introducer can itself be a breach.
- Treating a 'guaranteed' fund as risk-free.
Compliance, Record-Keeping, Supervision and Enforcement
What this domain tests
The compliance infrastructure around MPF schemes and intermediaries, the record-keeping rules, and the MPFA's supervisory and disciplinary toolkit.
Trustee and intermediary compliance
Approved trustees must act with care, skill and diligence, keep scheme assets with an independent approved custodian, appoint an auditor, maintain internal controls and segregation of duties, and report to the MPFA through audited accounts, periodic returns and notification of material changes. Intermediaries must maintain written policies on suitability, conflicts, complaints and training, and principals must supervise their subsidiary intermediaries.
Record-keeping
Client and transaction records must be kept for the period the regulator requires, in practice seven years. This covers client agreements, KYC and risk-profile documents, suitability rationales, transfer instructions, commission disclosure and training records. Records must be retrievable and produced on request during an inspection.
Supervision and enforcement
The MPFA supervises through periodic returns, on-site inspections, thematic reviews and mystery-shopping exercises, and can investigate and require production of records. Sanctions include warning letters, private and public reprimands, suspension or revocation of registration, pecuniary penalties and disqualification; scheme-level failures can lead to removal of trustees. Licensed or registered persons may also face action from the SFC, the Insurance Authority or the HKMA for the same conduct, and appeals against MPFA decisions go to the MPF Schemes Appeal Board. Employers face separate offences for failing to enrol or to pay contributions.
Worked example
A principal intermediary's file review finds that a subsidiary intermediary recommended funds to 40 clients but holds no risk-profile questionnaires and no record of the advice given. Without records the firm cannot demonstrate suitability. The principal bears responsibility for supervision and record-keeping, so the likely outcomes are a reprimand, conditions on registration, or suspension, not merely a reminder to the individual.
Traps that cost marks
- Assuming compliance sits only with the trustee; intermediaries carry their own obligations.
- Believing records may be destroyed after the tax year or after three years.
- Confusing MPFA discipline with SFC discipline; both can apply to the same conduct.
- Forgetting that the principal is accountable for its subsidiary intermediaries.
- Treating an appeal to the MPF Schemes Appeal Board as a first step rather than a review of an MPFA decision.
MPF Products, Fees, Charges and Fund Selection
What this domain tests
The MPF product shelf, how charges are structured and disclosed, and how a fund should be selected for a member.
Products
Constituent funds fall into equity, bond, mixed-asset, money-market, guaranteed and index-tracking categories, and every scheme must include the Default Investment Strategy: the Core Accumulation Fund and the Age 65 Plus Fund. Under the DIS a member's holdings de-risk automatically from age 50, shifting about 6.7 percentage points a year from the Core Accumulation Fund to the Age 65 Plus Fund until age 64. Guaranteed funds carry conditions: the guarantee depends on holding for a stated period and on the guarantor's creditworthiness.
Charges
- Management fee: covers trustee, investment manager, custodian and sponsor; the main ongoing cost.
- Subscription, redemption and switching fees: charged on dealings and set by each scheme.
- Out-of-pocket expenses: legal, audit, printing and similar costs.
- Fund Expense Ratio (FER): aggregate ongoing cost as a percentage of net asset value, the figure to compare because it captures more than the management fee alone.
DIS funds are fee-capped: management fee no more than 0.75% a year, and total ongoing costs including out-of-pocket expenses no more than 0.95% a year.
Selecting a fund
Match the fund to the member's risk tolerance, time to retirement, other retirement assets and cost sensitivity. Diversification across markets and asset classes matters more than chasing last year's best performer, and the comparison should be documented.
Worked example
A member has HK$300,000 and 20 years to retirement. Fund A costs 1.60% a year all-in; Fund B costs 0.90% with a similar strategy. Ignoring returns, the 0.70 percentage point difference compounds over 20 years and consumes a substantial slice of the final balance. A suitable recommendation records that comparison and the reasoning, not just the fund names.
Traps that cost marks
- Comparing management fees only and ignoring out-of-pocket expenses and the FER.
- Assuming a 'guaranteed' fund guarantees the member's capital in all circumstances.
- Treating the DIS as compulsory; members may opt out, but it applies if no valid instruction is given.
- Assuming last year's top performer is this year's suitable choice.
- Forgetting the 0.75% and 0.95% caps that apply to DIS funds.