Mandatory Provident Fund Quiz 04

Correct: Statement I is correct because for payments sent by post, the MPFSO considers the contribution paid on the date the cheque would normally be delivered by the postal service. Statement II is also correct as direct credit payments are only deemed paid once the funds have been successfully credited to the MPF scheme’s specific bank account, requiring employers to account for bank processing times.

**Incorrect:** Statement III is incorrect because for an employer (unlike a self-employed person), the contribution date for direct debit is determined by the date the trustee receives the remittance statement, not the date the instruction is issued. Statement IV is incorrect because if a cheque is bounced due to insufficient funds, the contribution is treated as not having been paid at all; there is no provision for a grace period that maintains the original deposit date.

**Takeaway:** Compliance with MPF contribution deadlines depends heavily on the chosen payment method, as the ‘deemed paid’ date varies between physical delivery, electronic transfers, and automated debits. Therefore, statements I and II are correct.

Correct: The MPF System is fundamentally designed around three key pillars: it is employment-based, meaning it covers the majority of the working population through their employment or self-employment; it is fully-funded, meaning that contributions are specifically set aside and invested to meet future retirement needs; and it is privately-managed, meaning that the schemes are operated by approved trustees and service providers from the private sector. Therefore, the core characteristics are (i), (ii), and (iii) only.

**Incorrect:** The MPF System is a defined contribution (DC) scheme, not a defined benefit (DB) scheme. In a defined contribution system, the final benefits are determined by the total amount of contributions made plus any investment gains or losses. In contrast, a defined benefit scheme guarantees a specific payout based on a formula (such as years of service and final salary). Because the MPF does not guarantee a specific benefit amount, statement (iv) is incorrect.

**Takeaway:** A thorough understanding of the MPF System requires recognizing it as a privately-managed, employment-based, and fully-funded defined contribution framework, which distinguishes it from pay-as-you-go or government-managed pension models.

In both the original three-pillar and the expanded five-pillar frameworks established by the World Bank, the Mandatory Provident Fund (MPF) system is classified as the second pillar. This pillar is specifically defined as a mandatory, privately-managed, and fully-funded contribution system that is employment-based, meaning it relies on the contributions of both employers and employees to build a retirement fund managed by private entities. Other pillars serve different functions: Pillar Zero represents non-contributory, publicly-financed social safety nets; Pillar One typically refers to a public contributory system; Pillar Three consists of voluntary personal savings; and Pillar Four involves informal support such as family assistance or non-financial assets like home ownership. The MPF does not fall into these categories because it requires mandatory participation and is funded by individual accounts rather than general taxation or voluntary choice alone. Recognizing the MPF as a Pillar Two system is fundamental to understanding Hong Kong’s retirement strategy, which seeks to balance individual responsibility, private sector efficiency, and a mandatory framework to address the challenges of an ageing population.

Correct: Statements I, II, and IV are accurate descriptions of the MPF System within the World Bank’s framework. The MPF is classified as Pillar Two because it is a mandatory, privately-managed, and fully-funded contribution system. It relies on private sector trustees and market competition to drive efficiency (unlike the publicly-managed Pillar One). Additionally, a core characteristic of the MPF System is that all mandatory contributions are fully and immediately vested in the scheme member upon payment into the scheme.

**Incorrect:** Statement III is incorrect because the MPF System is a “defined contribution” (DC) scheme, not a “defined benefit” (DB) scheme. In the MPF System, the amount of accrued benefits depends on the total contributions made and the investment returns earned, rather than a fixed payout formula based on years of service or salary.

**Takeaway:** The MPF System serves as the second pillar of Hong Kong’s retirement protection, functioning as an employment-based, privately-managed, and defined contribution system where investment risks and rewards are reflected in the member’s individual account. Therefore, statements I, II and IV are correct.

Correct: Statements I, II, and III accurately reflect the regulatory framework for unclaimed benefits and the offsetting mechanism. Accrued benefits are classified as unclaimed if a cheque remains unpresented for the 6-month “Specified Period” and the trustee is unable to locate the member during the subsequent 6-month period. The trustee is required to perform specific due diligence, including making three contact attempts within one month. Furthermore, under the Employment Ordinance and MPFSO, employers are permitted to offset Long Service Payments (LSP) or Severance Payments (SP) against the accrued benefits derived specifically from the employer’s contributions.

**Incorrect:** Statement IV is incorrect because unclaimed benefits continue to vest in the scheme member. While the MPFA maintains a centralized Unclaimed Benefits Register to assist the public in searching for lost accounts, the benefits themselves remain within the scheme and the member retains their legal right to those funds.

**Takeaway:** The classification of unclaimed benefits requires a two-stage 6-month process and documented contact attempts, while the offsetting of statutory employment payments is strictly restricted to the employer-funded portion of the MPF account. Therefore, statements I, II and III are correct.

Correct: Under the Mandatory Provident Fund Schemes Ordinance and the related Guidelines, registered intermediaries are required to use their best endeavors to avoid conflicts of interest. When a material interest exists—such as receiving a monetary benefit for a sale—the intermediary must disclose this conflict to the client. Additionally, the intermediary must document any regulated advice provided, including the underlying rationale, and obtain the client’s signature on this document. The principal intermediary is then responsible for retaining the original record for a minimum period of seven years to ensure it is available for regulatory inspection.

**Incorrect:** It is incorrect to suggest that records should only be kept for five years, as the regulatory standard is seven years. Furthermore, registered intermediaries are strictly prohibited from accepting cash payments from clients; any payments must be made by crossed cheques payable directly to the approved trustee or the registered scheme. It is also a misconception that disclosure of fees or ongoing cost illustrations is optional or limited to specific client types, as intermediaries should refer clients to all key disclosure information, including the fee table and fund expense ratio, to ensure informed decision-making.

**Takeaway:** Registered intermediaries must maintain high standards of transparency by disclosing conflicts of interest, strictly adhering to the seven-year record-keeping rule, and ensuring all client payments are handled via crossed cheques to the trustee.

Correct: Under Section 34M of the Mandatory Provident Fund Schemes Ordinance (MPFSO), specific exceptions are provided for the prohibition against carrying on regulated activities. These exceptions include solicitors and certified public accountants when the advice is wholly incidental to their professional practice, the MPFA when performing its statutory functions, and companies providing advice within the same corporate group, such as to a wholly owned subsidiary. Consequently, the individuals and entities described in I, II, III, and IV are all exempt from the prohibition. I, II, III, and IV.

**Incorrect:** Options that only include the professionals (solicitors and accountants) or only include the MPFA and corporate entities are incorrect because they fail to recognize the full scope of exemptions provided under Section 34M. The law explicitly protects all these categories to ensure that regulatory functions, professional services, and internal corporate communications are not unduly hindered by the general prohibition on unlicensed regulated activities.

**Takeaway:** The MPFSO balances the protection of scheme members with practical necessity by exempting the MPFA, specific professionals, and corporate groups from the need for intermediary registration when providing incidental or internal regulated advice regarding material decisions.

Correct: Under the Mandatory Provident Fund Schemes Ordinance, specifically Section 34ZL(3), a principal intermediary is legally required to ensure that its designated responsible officer is granted sufficient authority within the corporate structure. Furthermore, the firm must provide that officer with the necessary resources and support to effectively oversee the regulated activities of the firm and its subsidiary intermediaries.

**Incorrect:** While firms must maintain records of training undertaken by subsidiary intermediaries, the guidelines specify a minimum retention period of three years, not seven. The duty to supervise and monitor the compliance of subsidiary intermediaries rests with the principal intermediary itself and cannot be shifted to the MPFA. Additionally, while telephone marketing requires the maintenance of call logs and compliance guidelines, there is no regulatory requirement to seek individual approval from the SFC for every marketing call made.

**Takeaway:** A principal intermediary’s compliance framework must empower the responsible officer with both authority and resources while maintaining robust oversight and record-keeping for its subsidiary intermediaries for at least three years.

Correct: Statements I, II, and IV accurately reflect the regulatory framework under the Mandatory Provident Fund Schemes Ordinance (MPFSO). The MPFA has the authority to impose a pecuniary penalty of up to HK$10,000,000 or three times the profit gained or loss avoided, whichever is greater. For criminal offences involving the provision of false or misleading information with an intent to defraud during an investigation, the maximum penalty on conviction on indictment includes a fine of HK$1,000,000 and imprisonment for 7 years. Additionally, the MPFA may exercise disciplinary powers to revoke an intermediary’s registration and disqualify them for a specified period.

**Incorrect:** Statement III is incorrect because the MPFSO grants the MPFA the discretion to issue either a public or a private reprimand based on the nature of the non-compliance. There is no statutory requirement that limits the MPFA to only private reprimands for first-time offenders; the choice of reprimand depends on the severity and circumstances of the case.

**Takeaway:** Regulated persons under the MPF system face severe dual consequences for investigative misconduct: criminal prosecution (potentially leading to 7 years’ imprisonment for fraud) and administrative disciplinary orders (including heavy fines and loss of registration). Therefore, statements I, II and IV are correct.

Correct: Under the Mandatory Provident Fund (MPF) system, employers are required to make mandatory contributions for their relevant employees starting from the very first day of employment. However, regular employees (those who are not casual employees) are entitled to a “contribution holiday,” which means they are not required to make their 5% contribution for the first 30 days of employment and the first incomplete wage period that follows. Since the employee’s 30th day of employment falls in March, and the first complete wage period starting after that 30-day period begins on April 1st, the employee is exempt from contributing for the month of March. The employer, however, must contribute 5% of the employee’s relevant income for that month.

**Incorrect:** The statement that both parties must contribute is incorrect because it fails to account for the statutory contribution holiday granted to the employee. The suggestion that neither party is required to contribute is wrong because the employer’s obligation is immediate and does not include a holiday period. The claim that only the employee contributes while the employer is exempt is a complete reversal of the legal requirements, as the holiday benefit applies exclusively to the employee’s portion of the contribution.

**Takeaway:** While employers must begin MPF contributions from an employee’s first day of service, regular employees are exempt from making contributions during a ‘contribution holiday’ that covers the first 30 days of employment plus the remainder of the wage period in which that 30th day falls.

Correct: According to the MPFA Guidelines on Conduct (VI.2), a registered intermediary must ensure that any form intended for a client’s signature is duly completed in all material respects before the client signs it. This requirement is fundamental to acting honestly, fairly, and in the best interests of the client, as it prevents the risk of unauthorized or inaccurate information being submitted under the client’s name.

**Incorrect:** Accepting a signed blank form is a direct violation of conduct standards, even if a copy is provided later or if the intermediary attempts to authenticate the details themselves. Furthermore, any alterations made to a completed form must be initialed by the client (or otherwise authenticated by the client) rather than the intermediary. Regarding record-keeping, the principal intermediary is required to maintain copies of such forms for a minimum of seven years, not five years.

**Takeaway:** To maintain professional integrity and protect client interests, all material information on MPF-related forms must be finalized prior to obtaining a client’s signature, and these records must be retained for at least seven years.

The MPF Conservative Fund is subject to specific regulatory safeguards regarding fee deductions. Administrative expenses, which include trustee, custodian, investment management, and administration fees, cannot be deducted from the fund in any given month unless the actual investment earnings of the fund for that specific month exceed the earnings calculated based on the prescribed savings rate declared by the MPFA. This mechanism ensures that the fund’s net return remains competitive with basic bank savings rates during periods of low performance. Other regulatory interpretations are incorrect because they fail to recognize the specific benchmark used for fee deductions. It is not enough for the fund to simply achieve a positive return or a return higher than inflation; the benchmark is strictly the MPFA’s prescribed savings rate. Furthermore, while the fund is designed to be conservative, administrative fees are not entirely prohibited; they are merely conditional upon meeting the performance threshold relative to the savings rate. An MPF Conservative Fund serves as a low-risk investment option where the deduction of administrative expenses is performance-linked to the MPFA’s prescribed savings rate, providing a layer of protection for scheme members’ capital in low-interest environments.

Correct: According to the Mandatory Provident Fund Schemes Ordinance, when a subsidiary intermediary fails to complete the required continuing training within the specified timeframe, the MPFA may issue a written notice requiring completion within a minimum of 30 days. If the individual fails to comply with this notice, the MPFA is empowered to suspend their registration. If the training requirement remains unfulfilled for a further 30 days after the suspension has taken effect, the MPFA may then proceed to revoke the individual’s registration.

**Incorrect:** Immediate revocation of registration is not the first step; the regulatory framework requires a notice period and a suspension phase before revocation can occur. Furthermore, while Frontline Regulators (FRs) are responsible for supervising and investigating intermediaries, the MPFA is the sole authority designated to impose disciplinary sanctions such as suspension or revocation. Automatic termination without a formal notice and suspension process is not consistent with the procedural requirements for training non-compliance.

**Takeaway:** The enforcement process for continuing training requirements follows a structured escalation: a formal notice to comply, followed by suspension of registration, and ultimately revocation if the non-compliance is not rectified within 30 days of the suspension.

Correct: According to Section 34W of the Mandatory Provident Fund Schemes Ordinance (MPFSO), an individual seeking approval as a responsible officer (RO) must already be a subsidiary intermediary attached to the principal intermediary. The applicant must also demonstrate that the individual has sufficient authority and will be provided with the necessary resources and support to perform their specified responsibilities. Furthermore, a statutory “look-back” period applies, requiring that the individual has not had an RO approval revoked by the MPFA within the one year immediately preceding the application date.

**Incorrect:** Statement III is incorrect because Section 34X of the MPFSO provides the MPFA with broad powers to impose, amend, or revoke conditions on an intermediary’s registration or an officer’s approval at any time. This power is not limited to the initial application phase; the MPFA may impose new conditions even after a person has been registered or approved if it considers such action appropriate.

**Takeaway:** Approval for an MPF Responsible Officer requires the individual to be an attached subsidiary intermediary with sufficient corporate authority and a clean regulatory record regarding RO revocations for the past 12 months. The MPFA maintains continuous oversight through its power to modify regulatory conditions at any stage of the approval’s lifecycle. Therefore, statements I, II and IV are correct.

Correct: Statements I and II accurately reflect the provisions of the Employee Choice Arrangement (ECA), which allows employees to transfer accrued benefits derived from their own mandatory contributions from their current employment’s contribution account to a scheme of their choice once per calendar year. Statement III is correct because the Fund Expense Ratio (FER) is a retrospective calculation based on the expenses and fund size of the previous financial period, as disclosed in the Fund Fact Sheet.

**Incorrect:** Statement IV is incorrect because the Mandatory Provident Fund Schemes Authority (MPFA) does not require constituent funds to show an FER if they have less than two years of financial history. Therefore, it is not a mandatory disclosure for all funds from their inception date.

**Takeaway:** When advising on scheme portability and costs, intermediaries must note that the ECA only applies to the employee’s portion of mandatory contributions and that the FER is a historical figure not required for funds with less than two years of operation. Therefore, statements I, II and III are correct.

Correct: Under the Employee Choice Arrangement (ECA), a relevant employee has the right to transfer the accrued benefits derived from their own mandatory contributions made during their current employment to an MPF personal account of their choice. This transfer can be executed in a lump sum once per calendar year, unless the governing rules of the original scheme allow for more frequent transfers. This mechanism allows employees to exercise more control over their investment strategy while remaining with their current employer.

**Incorrect:** The employer’s portion of mandatory contributions attributable to the current employment is not transferable under the ECA and must remain in the scheme selected by the employer. Additionally, while mandatory contributions from former employment can be transferred to either a personal account or a contribution account at any time, the employee’s mandatory contributions from current employment are strictly limited to being transferred into a personal account only.

**Takeaway:** The ECA provides employees with the flexibility to move their own mandatory contributions from current employment to a personal account once a year, but it does not extend this portability to the employer’s current contributions, which remain locked in the employer’s chosen scheme until the employment ends.

Correct: Under the Employee Choice Arrangement (ECA), a relevant employee is entitled to transfer the accrued benefits derived from their own mandatory contributions made during their current employment to an MPF scheme of their choice. This transfer can be performed once every calendar year, allowing members to consolidate their personal contributions or seek better investment performance while remaining with the same employer.

**Incorrect:** It is incorrect to suggest that employer mandatory contributions can be transferred under the ECA while the employment is ongoing; these must remain in the scheme selected by the employer to ensure administrative stability. Similarly, while voluntary contributions may be transferable depending on specific scheme rules, they are not the statutory focus of the ECA’s mandatory transfer right. Reversing the rule to suggest only employer contributions are transferable is a fundamental misunderstanding of the portability regulations.

**Takeaway:** The Employee Choice Arrangement provides ‘portability’ for the employee’s portion of mandatory contributions from current employment, but does not extend this right to the employer’s portion until the employment relationship is terminated.

Correct: A soft guarantee is a type of guarantee where the minimum return or capital preservation is promised only if the scheme member meets specific qualifying conditions, such as a minimum investment period or reaching a certain age. Additionally, under MPF regulations, the Fund Fact Sheet (FFS), which serves as the fund’s report card, must be issued to members on a half-yearly basis to provide updates on performance, fees, and portfolio composition.

**Incorrect:** A hard guarantee would imply that the minimum return is provided regardless of any conditions, which does not fit a scenario where a member must stay until age 65. Furthermore, while other reports like the Annual Benefit Statement are issued yearly, the Fund Fact Sheet is specifically required to be produced twice a year, making quarterly or annual frequencies inaccurate for this specific document.

**Takeaway:** Scheme members should identify a guarantee as ‘soft’ when it is contingent upon qualifying conditions and rely on the half-yearly Fund Fact Sheet for the most current summary of a fund’s risk and performance.

Correct: Statements I, II, and III correctly identify the core pillars of the Mandatory Provident Fund (MPF) system. It is employment-based as it involves employers, employees, and self-employed persons. It is fully-funded because benefits are derived from the actual accumulation of contributions and investment returns in individual accounts. Furthermore, it is privately managed by approved trustees and investment managers rather than being a government-run pension fund.

**Incorrect:** Statement IV is incorrect because the MPF system is a Defined Contribution (DC) scheme, not a Defined Benefit (DB) scheme. In a DB scheme, the retirement benefit is usually calculated based on a formula involving years of service and salary, with the employer bearing the investment risk. In the MPF DC system, the benefit depends on the total contributions made and the net investment performance, with the member bearing the investment risk.

**Takeaway:** The MPF system is characterized by being employment-based, fully-funded, and privately-managed, operating under a defined contribution model where the final benefit is not pre-determined. Therefore, statements I, II and III are correct.

Correct: Statements I, III, and IV are accurate reflections of the socio-economic drivers for the MPF system. Statement I aligns with demographic projections from the Census and Statistics Department, which estimate that the population aged 65 and over will reach 36% (more than one-third) by 2064. Statement III correctly identifies that the MPF system serves as a safeguard for individuals who may lack the financial awareness or the inherent ability to accumulate sufficient savings independently. Statement IV accurately describes the challenge of an ageing population, where the shrinking workforce must support a growing number of retirees for longer periods.

**Incorrect:** Statement II is incorrect because modern retirement planning recognizes that traditional family support has significant shortcomings. It is not a guaranteed source of income, as some elderly individuals may not have children to support them, and many families lack the necessary financial resources to provide adequate care, potentially leading to old age poverty.

**Takeaway:** The MPF system was implemented as a mandatory pillar of retirement protection to address the systemic risks posed by a rapidly ageing population and the declining reliability of informal family-based support structures. Therefore, statements I, III and IV are correct.

Correct: According to the Mandatory Provident Fund Schemes Ordinance and the Interpretation and General Clauses Ordinance, if a contribution day falls on a Saturday, a public holiday, or a day with a gale or black rainstorm warning, the deadline is legally extended. The new deadline becomes the next following day that is not a Saturday, a public holiday, or a day affected by such weather warnings. This ensures that employers have a fair opportunity to process payments and statements when banks and offices are fully operational.

**Incorrect:** The claim that the contribution must be settled on the preceding Friday is incorrect because the law provides a statutory extension rather than requiring early payment. The assertion that the deadline remains the 10th because extensions only apply to the 60-day permitted period is a reversal of the actual rules; in fact, the 60-day enrollment period does not extend for holidays, while the contribution day does. Finally, the idea that the deadline would be the following Monday regardless of its status as a public holiday is incorrect, as public holidays are specifically excluded from being valid contribution days.

**Takeaway:** While the 60-day permitted period for enrolling new employees is a fixed duration that does not extend for weekends or holidays, the monthly contribution day is flexible and shifts to the next available working day if it falls on a Saturday, public holiday, or during specific severe weather warnings.

Correct: Statements I, II, III, and IV are all accurate according to the MPFA Guidelines on Conduct Requirements. Specifically, any identified compliance failures must be reported to the relevant regulators within 14 working days (Statement I). The retention period for records related to regulated activities, including audio and written records, is a minimum of seven years (Statement II). For complaints of a serious or criminal nature, such as unauthorized transfers or forgery, the intermediary must notify the regulators immediately (Statement III). Furthermore, to mitigate fraud risks, principal intermediaries must have controls to prevent subsidiary intermediaries from accepting cash or uncrossed cheques (Statement IV).

**Incorrect:** All statements provided are correct. Common misconceptions in this area often involve the reporting timeframe (mistakenly believing it is 30 days instead of 14 working days) or the record-keeping duration (mistakenly believing it is 2 or 5 years instead of 7 years). Additionally, while general complaints are summarized quarterly for the MPFA, serious/criminal complaints require immediate notification, not just periodic reporting.

**Takeaway:** Registered MPF intermediaries must adhere to strict internal control standards that prioritize client asset protection, long-term record retention (7 years), and proactive reporting of both compliance failures and serious client complaints to regulators. Therefore, all of the above statements are correct.

Correct: Under the Mandatory Provident Fund Schemes Ordinance, a ‘material decision’ specifically includes a decision regarding the amount of accrued benefits to be transferred from one constituent fund of an MPF scheme to another constituent fund within that same scheme. Because this action involves a specific choice about the allocation and movement of assets within the MPF system, inducing a person to make such a decision for reward is classified as a regulated activity that requires the individual to be a registered intermediary.

**Incorrect:** Providing a factual list of all available MPF trustees, explaining the general legal requirements for who must join the MPF system, or assisting with purely administrative tasks like updating a home address do not qualify as inducing a material decision. These actions are considered either the provision of public information, legal education, or clerical support, none of which involve influencing a client’s specific choice to join, contribute to, or transfer funds within a particular MPF product.

**Takeaway:** A material decision involves specific choices regarding joining schemes, making contributions, or transferring benefits; individuals who induce others to make these decisions in a professional capacity must be registered as MPF intermediaries.

Correct: Statements I, II, and III accurately reflect the procedural requirements and appeal mechanisms under the Mandatory Provident Fund Schemes Ordinance (MPFSO). The MPFA is legally obligated to provide a preliminary notice in writing that includes the reasons for its view and the proposed sanctions, while also granting the intermediary the right to make representations in either oral or written form. Additionally, the statutory period for filing an appeal with the Mandatory Provident Fund Schemes Appeal Board is two months from the date of the decision notice.

**Incorrect:** Statement IV is incorrect because the MPFA is required to include a record of disciplinary orders in the Register of Intermediaries for a period of five years, not seven years. Furthermore, regarding public disclosure, the MPFA is empowered to disclose details of disciplinary decisions except for private reprimands.

**Takeaway:** The disciplinary framework for MPF intermediaries ensures procedural fairness by requiring the MPFA to provide a preliminary notice and an opportunity for representation before a final decision is made, with an independent appeal channel available for a two-month period. Therefore, statements I, II and III are correct.

Correct: The Mandatory Provident Fund (MPF) system in Hong Kong is characterized by being employment-based, meaning it is linked to the employment relationship between employers and employees. It is also a fully-funded system where contributions are specifically set aside and accumulated in individual accounts to fund future retirement benefits. Furthermore, it is privately-managed, as the schemes are operated by approved private-sector trustees rather than the government.

**Incorrect:** Statement IV is incorrect because the MPF system is a defined contribution (DC) scheme, not a defined benefit (DB) scheme. In a defined contribution system, the retirement benefit is determined by the total amount of contributions made plus any investment returns or losses, whereas a defined benefit system guarantees a specific payout based on factors like salary history and years of service.

**Takeaway:** The MPF system’s design relies on an employment-based, fully-funded, and privately-managed framework to ensure the long-term sustainability of retirement protection for the Hong Kong workforce. I, II & III only. Therefore, statements I, II and III are correct.

Correct: Statements I, II, and IV accurately reflect the statutory conduct requirements under Section 34ZL of the Mandatory Provident Fund Schemes Ordinance (MPFSO). Principal intermediaries (PIs) are legally required to maintain comprehensive records of regulated activities conducted by both themselves and their attached subsidiary intermediaries (SIs) to facilitate regulatory oversight. Furthermore, all intermediaries must adhere to a “prudent person” standard, exercising a level of care, skill, and diligence expected in the industry. PIs are also specifically responsible for implementing internal controls and procedures to ensure that their SIs comply with all relevant regulatory requirements.

**Incorrect:** Statement III is incorrect because Section 34ZL(1)(c) of the MPFSO explicitly restricts intermediaries to advising only on matters for which they are competent. Registration and attachment to a principal intermediary do not waive the requirement for individual competence in specific subject areas. Intermediaries must ensure they possess the necessary knowledge and expertise before providing advice on any specific MPF-related matter.

**Takeaway:** The regulatory framework for MPF intermediaries emphasizes the dual responsibility of individual conduct (prudence and competence) and institutional oversight (record-keeping and internal controls by the principal intermediary) to protect client interests. Therefore, statements I, II and IV are correct.

Correct: Statement I is correct because any award determined by a court or tribunal that represents wages, commissions, bonuses, or perquisites is included in the definition of relevant income. Statement IV is correct because tips or service charges that are collected by the employer (including those added to credit card bills) and subsequently distributed to employees are considered relevant income for MPF contribution purposes.

**Incorrect:** Statement II is incorrect because payment in lieu of notice is specifically excluded from the definition of relevant income, as it does not fall under the nine specified heads of income (wages, salary, leave pay, fee, commission, bonus, gratuity, perquisite, or allowance). Statement III is incorrect because non-monetary benefits, such as the employer providing a car or covering fuel and maintenance expenses, are not classified as relevant income.

**Takeaway:** For MPF purposes, relevant income generally encompasses all monetary payments derived from employment, including commissions and employer-handled tips, but excludes non-monetary benefits and specific statutory termination payments like payment in lieu of notice, severance pay, and long service pay. Therefore, statements I and IV are correct.

Correct: Statements I, II, and III are accurate reflections of the World Bank’s five-pillar framework and the MPF System’s role within it. The MPF System is specifically identified as Pillar Two, which is characterized by being mandatory, privately managed, and fully funded. Because it is a defined contribution system, the ultimate benefits available to a member are directly linked to the total contributions paid into their account plus any investment gains or losses. Furthermore, Pillar Four correctly identifies non-financial or informal supports, such as family help and personal assets like housing, which complement the formal pension pillars.

**Incorrect:** Statement IV is incorrect because the MPF System is not designed to be the sole or sufficient source of retirement income for Hong Kong’s population. The World Bank framework emphasizes that no single pillar can effectively solve the issue of retirement protection in isolation. Instead, the MPF System is intended to work in conjunction with other pillars, such as government social security (Pillar 0/1) and personal voluntary savings (Pillar 3), to provide comprehensive financial security for the elderly.

**Takeaway:** The MPF System is a mandatory, employment-based, privately-managed second pillar that functions as a defined contribution scheme, requiring integration with other pillars of the World Bank framework to ensure adequate retirement protection. I, II & III only. Therefore, statements I, II and III are correct.