Mandatory Provident Fund Schemes Examination Set Two

MPF Exempted ORSO Scheme with Closed Membership
The scheme is an MPF exempted ORSO scheme, but new relevant employees are not permitted to join this ORSO scheme and need to be covered under an MPF scheme. Existing members could continue to accrue benefits under the ORSO scheme. Again, existing members had to be offered the option to join an MPF scheme.

In the event of the winding up of an ORSO scheme, the employer must notify the Registrar of Occupational Retirement Schemes and each scheme member of that fact, within 14 days of the commencement of the winding up.

Exhibition and Provision of Exemption Certificate
(i) display the exemption certificate at all times in a conspicuous position at:
 the relevant employer’s principal office in Hong Kong;
 if there is no such office, each premise where a member of the ORSO scheme is employed by them.
(ii) provide each member with a copy of the MPF exemption certificate.

(1) On conviction on indictment to a fine of $5,000,000 and to imprisonment for 7 years and, in the case of a continuing offence, to a further fine of $100,000 for each day on which the offence is continued; or
(2) On summary conviction to a fine of $500,000 and to imprisonment for 2 years and, in the case of a continuing offence, to a further fine of $10,000 for each day on which the offence is continued.

Principal intermediary refers to a business entity (Type A regulatee) registered by the MPFA as an intermediary to carry on regulated activities.

All registered MPF intermediaries are subject to supervisory oversight by frontline regulators (“FRs”) in accordance with the following criteria which is set out in the relevant legislation :
(a) MA to be the FR of all principal intermediaries who are its regulatees, including those who have dual capacities and are concurrently also regulatees in the insurance and/or securities sectors;
(b) IA to be the FR of the other principal intermediaries who are its regulatees, including those who are concurrently also regulatees in the securities sector; and
(c) SFC to be the FR of the remaining principal intermediaries who are regulatees in the securities sector only.

An index-tracking fund is a collective investment scheme with the primary objective of tracking or replicating the investment performance of an index in either equities or debt securities. Such funds aim at producing or achieving investment returns that closely match or correspond to the performance of the index being tracked.

To safeguard scheme members against undue investment risk, comprehensive regulations governing the investment of scheme assets have been prescribed in the MPF legislation. These have the following aims:
(a) to ensure prudent and sound investment management;
(b) to ensure that investment portfolios meet all required standards; and
(c) to ensure that investments are well-diversified.

Investment Restrictions
(a) Spread of Investment
(b) Restrictions on Borrowing and Lending of Securities
(c) Restrictions on Borrowing of Money
(d) Restrictions on Acquiring Securities that Carry an Unlimited Liability
(e) Investment Restriction on Employer Sponsored Schemes

Defined Benefit Schemes
The employer’s contribution rates are not defined but are recommended by an actuary from time to time after performing actuarial valuations. The amount of benefits a member is entitled to is generally based on a formula with reference to their age, years of service, final average salary etc. Hybrid schemes incorporating both defined contribution schemes and defined benefit schemes features are also classified as defined benefit schemes.