Mandatory Provident Fund Quiz 05

Correct: Statement I is accurate because the Fund Fact Sheet (FFS) is indeed a mandatory disclosure document issued on a half-yearly basis to provide scheme members with a summary of fund performance, expense ratios, and portfolio holdings. Statement II is also correct as a “soft guarantee” within a guaranteed fund is defined by the presence of qualifying conditions, such as a minimum investment period or a “career average” requirement, which must be met for the guarantee to apply.

**Incorrect:** Statement III is incorrect because the maximum relevant income level for a casual employee who is a member of an industry scheme is $1,000 per day, whereas the $30,000 monthly limit applies to non-casual employees. Statement IV is incorrect because the sole investment objective of an index-tracking fund is to track or replicate the performance of a specific market index, rather than attempting to outperform it through active management.

**Takeaway:** Understanding the specific disclosure timelines of Fund Fact Sheets and the distinction between hard and soft guarantees is crucial for MPF intermediaries. Additionally, practitioners must differentiate between the contribution limits for casual employees in industry schemes versus standard employees in master trust schemes. Therefore, statements I and II are correct.

Correct: Statements I, II, and III are accurate according to the Mandatory Provident Fund Schemes Ordinance (MPFSO). Before a disciplinary order is finalized, the MPFA is legally required to provide the regulated person with a written notice of its preliminary view and the reasons behind it, while also granting them the opportunity to make oral or written representations. If the intermediary is dissatisfied with the final decision, they have a two-month window to appeal to the Mandatory Provident Fund Schemes Appeal Board. Furthermore, the regulatory structure designates Frontline Regulators (FRs) to handle investigations, while the MPFA remains the exclusive authority for imposing disciplinary sanctions.

**Incorrect:** Statement IV is incorrect because the statutory requirement for the MPFA is to maintain a record of disciplinary orders in the Register of Intermediaries for a period of five years, not ten years. Additionally, while the MPFA has the power to disclose disciplinary details to the public, private reprimands are specifically excluded from such public disclosure to maintain their confidential nature.

**Takeaway:** The MPF disciplinary framework ensures procedural fairness through mandatory preliminary notices and representation rights, while centralizing sanctioning power in the MPFA and providing a clear two-month timeline for independent appeals. Therefore, statements I, II and III are correct.

Correct: Statements I, II, and III are accurate according to the Mandatory Provident Fund Schemes Ordinance (MPFSO). The MPFA has the authority to impose a pecuniary penalty of up to $10,000,000 or three times the profit gained or loss avoided, whichever is higher, as a disciplinary order. Furthermore, providing false or misleading information with the intent to defraud during an investigation is a serious offence that carries a maximum penalty of 7 years imprisonment upon conviction on indictment. The MPFA is also empowered to issue both public and private reprimands as part of its disciplinary regime. Therefore, the correct combination is I, II & III only.

**Incorrect:** Statement IV is incorrect because the statutory fine on summary conviction for failing to comply with an investigation requirement with the intent to defraud is $100,000, not $50,000. The $50,000 fine applies to cases of non-compliance where there is no specific intent to defraud, such as failing to comply without a reasonable excuse.

**Takeaway:** Intermediaries must be aware that the MPFA possesses a wide range of disciplinary and enforcement powers. Intentional deception or non-cooperation during regulatory investigations significantly increases the severity of both criminal penalties and disciplinary sanctions. Therefore, statements I, II and III are correct.

Correct: According to the Mandatory Provident Fund Schemes Ordinance (MPFSO), if an officer or employee of a company, with the intent to defraud, causes or allows the company to fail to comply with an inspection or investigation requirement, they commit a serious criminal offense. Upon conviction on indictment, the maximum penalty for this specific offense is a fine of $1,000,000 and imprisonment for 7 years. This high level of punishment reflects the severity of using fraudulent intent to obstruct regulatory oversight.

**Incorrect:** A fine of $100,000 and imprisonment for 6 months represents the maximum penalty for the same offense if the person is convicted on a summary basis rather than on indictment. A fine of $1,000,000 and imprisonment for 2 years is the maximum penalty on indictment for providing false or misleading information when the person knows it is false or is reckless, but it is not the penalty for failing to comply with intent to defraud. A pecuniary penalty of $10,000,000 is a disciplinary order that the MPFA may impose for a failure to comply with performance requirements, which is distinct from criminal penalties handed down by a court for fraudulent obstruction.

**Takeaway:** The MPFSO distinguishes between simple non-compliance and non-compliance involving an intent to defraud; the latter carries significantly harsher criminal penalties, including up to 7 years of imprisonment on indictment.

Correct: Statements I, II, and III accurately reflect exceptions to the prohibitions on carrying on regulated activities as set out in Section 34M of the Mandatory Provident Fund Schemes Ordinance (MPFSO). Certified public accountants are exempt when giving regulated advice that is wholly incidental to their professional practice. Furthermore, advice provided through newspapers or magazines made generally available to the public (and not by subscription only) is not prohibited. Additionally, approved trustees are permitted to carry on regulated activities for the purpose of complying with statutory requirements under the MPFSO.

**Incorrect:** Statement IV is incorrect because Section 34L(3) of the MPFSO explicitly prohibits a person from taking or using the title of “principal intermediary” unless they are registered as such. A subsidiary intermediary is restricted to using the title “subsidiary intermediary” or “附屬中介人” and cannot use the title of a principal intermediary, regardless of their seniority or role within the firm.

**Takeaway:** While the MPFSO strictly prohibits unauthorized persons from carrying on regulated activities or using specific titles, it provides clear exceptions for professionals acting incidentally to their practice, public media broadcasts, and trustees performing their statutory duties to ensure the regulatory framework remains practical and functional. Therefore, statements I, II and III are correct.

Correct: Under the MPF Guidelines, registered intermediaries are strictly prohibited from accepting cash payments from clients. When a client provides a cheque, the intermediary must ensure it is crossed and made payable only to the approved trustee of the registered scheme or the registered scheme itself. Additionally, the principal intermediary is required to maintain original records of regulated activities, including the advice provided and the underlying rationale, for a minimum period of seven years to allow for regulatory inspection.

**Incorrect:** Intermediaries cannot accept cash under any circumstances, even if a receipt is provided or if it is deposited into a client account. Cheques must never be made payable to the intermediary or the principal intermediary’s firm, as this violates the principle of asset segregation. The retention period for these specific MPF records is seven years, not three, five, or ten years, as specified in the Mandatory Provident Fund Schemes Ordinance and related guidelines.

**Takeaway:** To ensure client asset protection and regulatory compliance, intermediaries must only handle crossed cheques payable to the trustee or scheme and ensure all transaction and advice records are preserved for at least seven years.

Correct: Under the Mandatory Provident Fund Schemes (General) Regulation, an MPF Conservative Fund has a unique fee deduction mechanism. Administrative expenses, which include trustee, custodian, and investment management fees, can only be deducted from the fund in a specific month if the fund’s investment earnings for that month exceed the prescribed savings rate declared by the MPFA. This ensures that the fund’s performance is prioritized relative to the prevailing bank savings rates before fees are applied.

**Incorrect:** MPF Conservative Funds are strictly prohibited from investing in equities or commodities, as they must be 100% invested in Hong Kong dollar-denominated short-term bank deposits or high-quality debt securities. The average investment period of the portfolio must not exceed 90 days, rather than being a long-term investment. Furthermore, the law explicitly prohibits the imposition of initial fees, redemption charges, or bid-offer spreads on these funds to protect the interests of members seeking a low-risk option.

**Takeaway:** The MPF Conservative Fund is a non-guaranteed, low-risk product with strict investment restrictions (HKD only, short-term) and a fee structure that is contingent upon the fund’s performance exceeding the MPFA’s prescribed savings rate.

Correct: According to the Mandatory Provident Fund Schemes Ordinance, if a subsidiary intermediary fails to complete training specified by the MPFA, the Authority may issue a written notice requiring completion within a set period (usually 30 days). If the individual fails to comply with this notice, the MPFA may suspend their registration. If the requirement is still not met within 30 days after the suspension begins, the MPFA then has the power to revoke the individual’s registration as a subsidiary intermediary.

**Incorrect:** Immediate revocation of registration upon the first instance of non-compliance is incorrect because the regulatory framework requires a graduated approach involving a formal notice and a suspension period first. The suggestion that Frontline Regulators (FRs) impose these disciplinary sanctions is also inaccurate; while FRs conduct investigations and inspections, the MPFA is the sole authority empowered to impose disciplinary sanctions such as suspension or revocation. Furthermore, failing to meet training requirements does not trigger an automatic requirement to retake the qualifying examination, but rather requires the completion of the specific training modules identified by the MPFA.

**Takeaway:** The MPFA follows a specific disciplinary escalation for training non-compliance: a written notice is followed by registration suspension, and if the breach is not rectified within 30 days of suspension, the registration may be revoked.

Correct: Class G insurance policies are specifically designed to provide guarantees on either the capital invested or the rate of return. According to regulatory standards, these policies must be supported by a guarantor to ensure the guarantee is met. This guarantor can be the insurance company that issued the policy itself, or alternatively, a third-party financial institution that has received authorization from the Monetary Authority (MA).

**Incorrect:** It is incorrect to claim that the insurance fund must be managed exclusively by the issuing company, as regulations allow for the appointment of professional investment managers. Furthermore, while Class G policies offer capital protection, they are distinct from Money Market Funds, which focus on short-term interest-bearing securities like treasury bills rather than insurance-based guarantees. Finally, Class G policies are not intended to be aggressive growth vehicles like Equity Funds, which prioritize beating market performance through stock volatility rather than providing capital guarantees.

**Takeaway:** A Class G insurance policy is characterized by its capital or return guarantee, which must be backed by the insurer or an MA-authorized financial institution, and the underlying fund can be managed by the insurer or an appointed professional manager.

Correct: Statements I, II, and IV accurately reflect the requirements under the MPFA Guidelines. A client with a primary education level or below is classified as a vulnerable client. Decisions involving a transfer out of a guaranteed fund are specifically categorized as “key decisions” that necessitate extra care. Additionally, any documentation regarding the choices offered to a vulnerable client (such as the option to have a witness) must be retained by the principal intermediary for a minimum of seven years.

**Incorrect:** Statement III is incorrect because the guidelines explicitly state that a post-sale call must be conducted by an authorized person of the principal intermediary who is NOT the subsidiary intermediary who performed the regulated activity. This requirement is designed to ensure an independent verification of the client’s understanding and the suitability of the process.

**Takeaway:** When dealing with vulnerable clients—such as those with low education levels—intermediaries must provide extra support for key decisions (like guaranteed fund transfers) and ensure that verification measures, such as post-sale calls, are handled by independent staff and documented for seven years. Therefore, statements I, II and IV are correct.

Correct: Under the Guidelines on Conduct Requirements for Registered Intermediaries issued by the MPFA, intermediaries must adhere to several core principles. These include acting honestly, fairly, and in the best interests of the client (Principle 1), exercising care, skill, and diligence (Principle 2), providing adequate disclosure of information to the client (Principle 4), and disclosing any conflicts of interest (Principle 6). All four statements provided represent these fundamental statutory conduct requirements.

**Incorrect:** Any combination that excludes one or more of these statements is incorrect because these requirements are not optional; they are cumulative duties that a registered intermediary must satisfy during the course of their professional activities. For example, acting with integrity (I) does not exempt an intermediary from the specific duty to disclose conflicts (II) or the duty of diligence (IV).

**Takeaway:** The MPF conduct framework is designed to ensure investor protection by requiring intermediaries to maintain high standards of professional integrity, transparency, and competence in all client dealings. Therefore, all of the above statements are correct.

Correct: Statement I is correct because tips or service charges collected by the employer (such as those included in credit card bills) and subsequently distributed to employees are classified as relevant income for MPF purposes. Statement III is also correct because cash payments made by an employer to cover the maintenance, registration, or license fees for a vehicle owned by the employee are considered monetary benefits and are included in the calculation of relevant income.

**Incorrect:** Statement II is incorrect because statutory severance payments and long service payments are specifically excluded from the definition of relevant income under the Mandatory Provident Fund Schemes Ordinance. Statement IV is incorrect because meal vouchers are categorized as non-monetary benefits, which are not included in the determination of relevant income.

**Takeaway:** Relevant income generally includes all monetary payments like wages, bonuses, and employer-distributed tips, but excludes non-monetary perks and specific statutory payments such as severance or long service pay. I & III only. Therefore, statements I and III are correct.

Correct: Statements I, II, and III represent core conduct requirements under Section 34ZL of the Mandatory Provident Fund Schemes Ordinance and Guidelines VI.2. Intermediaries must disclose their relationship with the principal intermediary to ensure transparency regarding their capacity. When a transfer is involved, they are specifically required to provide fee information for both the existing and proposed schemes and must warn about the potential loss of guarantees to ensure the client makes an informed decision.

**Incorrect:** Statement IV is incorrect because the requirement to have regard to a client’s particulars and perform a suitability assessment is a statutory obligation under Section 34ZL(1)(d). The Guidelines do not allow an intermediary to bypass these conduct requirements even if a client suggests a waiver, as the intermediary is always expected to act with care, skill, and diligence in the client’s best interests.

**Takeaway:** Registered intermediaries must fulfill specific disclosure duties regarding their capacity, fees, and fund-specific risks like guarantees during the transfer process, and these conduct duties cannot be bypassed through client waivers. I, II & III only. Therefore, statements I, II and III are correct.

Correct: Statements I, III, and IV are accurate according to the MPFA Guidelines. Choosing a specific constituent fund is explicitly listed as a ‘key decision’ under Guideline III.18, which triggers the requirement for extra care when dealing with vulnerable clients (such as those with low education levels). Guideline III.19 requires that if the intermediary offers the client a witness or companion, the documentation of this choice must be kept for at least seven years. Additionally, if a post-sale call is utilized as the extra care measure, it must be audio-recorded and performed within seven working days.

**Incorrect:** Statement II is incorrect because Guideline III.19(b) specifies that the post-sale call must be conducted by an authorized person of the principal intermediary who is NOT the subsidiary intermediary who conducted the regulated activity. This requirement is intended to provide an independent check on the sales process and ensure the client truly understands the decision made.

**Takeaway:** When dealing with vulnerable clients, registered intermediaries must implement specific safeguards for ‘key decisions,’ such as fund selection or transfers. These safeguards include either providing a witness/companion or conducting an independent, recorded post-sale call within seven working days, with all relevant records maintained for seven years. Therefore, statements I, III and IV are correct.

Correct: Statements I, III, and IV accurately reflect the conduct requirements set out in the MPFA Guidelines. Statement I complies with Guideline III.35, which mandates disclosure of whether the intermediary’s benefits vary by product choice. Statement III aligns with Guideline III.38(c), requiring intermediaries to explain the guarantor and associated risks for guaranteed funds. Statement IV correctly identifies the seven-year record-keeping requirement for disclosure documents as specified in Guideline III.36.

**Incorrect:** Statement II is incorrect because Guideline III.40(a) explicitly states that intermediaries must explain to clients that past performance is not necessarily a reliable indicator of future performance. Suggesting it is a reliable indicator would be a breach of conduct standards. Furthermore, comparisons should ideally be based on net performance over a long-term period (at least five years) rather than short-term gross figures.

**Takeaway:** MPF intermediaries are bound by strict disclosure and communication standards, including the transparency of their own compensation structures, the detailed risks of specific fund types like guaranteed funds, and the maintenance of client disclosure records for a minimum of seven years. Therefore, statements I, III and IV are correct.

Correct: Under the Employee Choice Arrangement (ECA), scheme members are permitted to transfer the accrued benefits derived from their own mandatory contributions made during their current employment to an MPF scheme of their own choice at least once every calendar year. Furthermore, the law stipulates that no fees or financial penalties may be charged to or imposed on a member for transferring accrued benefits between schemes, except for necessary transaction costs (such as brokerage fees or stamp duty) incurred in the buying and selling of investments that are payable to a party other than the approved trustee.

**Incorrect:** The suggestion that an employee needs their employer’s written consent to initiate an ECA transfer is incorrect, as the right to transfer employee mandatory contributions belongs solely to the member. The claim that both employer and employee mandatory contributions from current employment can be transferred is also false; the ECA specifically applies only to the employee’s portion. Finally, the idea that a trustee can charge a fixed percentage redemption fee for administrative overhead is prohibited by MPF regulations, which aim to protect members’ retirement savings from being diminished by transfer charges.

**Takeaway:** The Employee Choice Arrangement enhances member autonomy by allowing the annual transfer of employee mandatory contributions to a preferred scheme without administrative fees, though this portability does not extend to the employer’s contribution portion while the employment relationship is ongoing.

Correct: The Guidelines on Conduct Requirements for Registered Intermediaries are issued to provide guidance on the minimum standards of conduct expected of regulated persons. They assist the Mandatory Provident Fund Schemes Authority (MPFA) in determining whether a person has complied with statutory performance requirements. However, they are explicitly described as non-exhaustive, meaning that conduct not specifically mentioned in the Guidelines can still be found to be in breach of the law.

**Incorrect:** The Guidelines do not have the force of law and cannot override or replace the Mandatory Provident Fund Schemes Ordinance (MPFSO) or other legislative provisions. They are intended to be complementary to, rather than a replacement for, the codes or guidelines issued by frontline regulators like the Securities and Futures Commission (SFC). Additionally, frontline regulators are specifically required to be guided by these Guidelines when performing their supervisory and investigatory duties, rather than disregarding them.

**Takeaway:** While the Conduct Guidelines are essential for understanding the MPFA’s expectations for intermediary behavior, they are a non-legal, non-exhaustive framework that works alongside existing legislation and frontline regulator codes.

Correct: Statements I, II, and IV are correct under the Mandatory Provident Fund Schemes (General) Regulation. The primary investment manager of an MPF scheme or an approved pooled investment fund (APIF) must be a company incorporated in Hong Kong with a minimum paid-up share capital and net assets of HK$10 million. To protect member interests, the investment manager and its delegates must maintain independence from the scheme’s trustee and custodian. Furthermore, debt securities are eligible for investment if they are issued or guaranteed by a government or an organization of similar standing, or if they meet the credit rating requirements specified by the MPFA.

**Incorrect:** Statement III is incorrect because the MPF legislation specifically prohibits the acquisition of partly paid-up shares for investment purposes. This restriction is in place to prevent the fund from being exposed to the potential liability of future calls for capital, which would increase the risk profile of the scheme members’ assets.

**Takeaway:** MPF investment regulations are designed to ensure prudent management through strict capital requirements, independence of key service providers, and the exclusion of high-risk instruments like partly paid-up shares, while allowing for a diversified range of high-quality debt and equity securities. I, II & IV only. Therefore, statements I, II and IV are correct.

Correct: For a non-casual employee, the contribution deadline (known as the Contribution Day) is the 10th day of the month following the calendar month in which the ‘permitted period’ ends, or the month in which the relevant contribution period ends, whichever is later. The permitted period refers to the first 30 days of employment. If an employee starts on October 15, the 30th day falls on November 13. Since the month in which the 30th day ends is November, the deadline for the employer to remit the first set of contributions (covering the employer’s portion from day one and the employee’s portion after the 30-day holiday) is December 10th.

**Incorrect:** November 10th is incorrect because the 30-day permitted period has not yet concluded by the end of October, meaning the ‘later’ trigger for the deadline has not been reached. November 14th is incorrect as it mistakenly assumes the deadline is immediately after the 30-day holiday ends, rather than following the standard monthly remittance cycle. January 10th is incorrect as it likely confuses the 60-day enrollment deadline with the monthly contribution remittance schedule.

**Takeaway:** The first MPF contribution for a new non-casual employee is due on the 10th day of the month following the month in which the employee completes their first 30 days of employment.

Correct: Statement I is correct as the Occupational Retirement Schemes Ordinance requires an employer to notify the Registrar and all scheme members within 14 days of the commencement of a winding-up process. Statement II is also correct; in a “Frozen” ORSO scheme, no further contributions are made for future service, and the employer is required to enroll both existing and new employees into an MPF scheme to meet mandatory contribution requirements.

**Incorrect:** Statement III is incorrect because existing members (those who were members of the ORSO scheme before the MPF launch) who choose to remain in an MPF exempted ORSO scheme are specifically not subject to the preservation, portability, and withdrawal requirements regarding “minimum MPF benefits.” Statement IV is incorrect because employer-contributed benefits paid out upon scheme termination are generally taxable, as they are not being paid out under the specific exempt circumstances such as retirement, death, or incapacity.

**Takeaway:** When transitioning or terminating ORSO schemes in the MPF era, employers must strictly follow notification timelines and understand that tax exemptions and preservation rules vary significantly depending on the member’s status and the reason for the payout. The correct combination is I & II only. Therefore, statements I and II are correct.

Correct: Statements I, II, and III accurately reflect the conduct requirements for MPF registered intermediaries. According to the MPFA Guidelines, intermediaries must provide and explain the “Guide to Transfer Benefits under Employee Choice Arrangement” during ECA transfers (III.44). If a client is transferring out of a guaranteed fund, the intermediary must warn them about the potential loss of the guarantee, document this warning, and obtain a signed acknowledgement (III.48). Additionally, when comparing fees, intermediaries are required to illustrate the long-term impact of fees on potential returns using examples (III.51).

**Incorrect:** Statement IV is incorrect because Guideline III.42 states that while an intermediary may refer to general market outlook, they should avoid predicting, projecting, or forecasting a constituent fund’s future or likely performance. Providing specific forecasts to justify a transfer is a breach of these conduct standards.

**Takeaway:** MPF intermediaries must ensure clients are fully informed of the procedural steps of a transfer, the specific risks of leaving guaranteed products, and the long-term effect of costs, while maintaining a strict prohibition against performance forecasting. Therefore, statements I, II and III are correct.

Correct: Statements I, II, and III are fundamental conduct requirements under Section 34ZL of the Mandatory Provident Fund Schemes Ordinance and Guidelines VI.2. Intermediaries are required to perform a suitability assessment (Know Your Client) to understand the client’s risk profile and objectives. They must also provide transparent disclosure regarding their identity, the principal intermediary they represent, and any monetary or non-monetary benefits received. Furthermore, explaining the specific features and risks of the funds is essential to ensure the client makes an informed decision in their own best interest.

**Incorrect:** Statement IV is incorrect because offering personal cash rebates or unauthorized inducements is a breach of the duty to act honestly, fairly, and with integrity. Guidelines VI.2 specify that intermediaries should not offer gifts or incentives that might influence a client’s decision-making process or distract them from the actual features of the MPF product, as this may conflict with the client’s best interests.

**Takeaway:** Registered intermediaries must maintain high standards of integrity by prioritizing client suitability and full disclosure while avoiding any prohibited inducements that could compromise professional judgment. Therefore, statements I, II and III are correct.

Correct: Statements I, III, and IV accurately reflect the requirements under the MPFA Guidelines for handling vulnerable clients. Registered intermediaries must provide extra care for clients with special needs (such as those with low education levels) when they make ‘key decisions,’ which include transferring funds out of a guaranteed fund. This care involves offering the client a witness (either a companion or an additional staff member) or performing a post-sale call. Furthermore, the principal intermediary is mandated to keep records of these interactions, including signed documents or audio recordings, for at least seven years.

**Incorrect:** Statement II is incorrect because the Guidelines specifically require that a post-sale call be conducted by an authorized person of the principal intermediary who was not the subsidiary intermediary who performed the regulated activity. This requirement is designed to provide an independent check on the sales process and ensure the client truly understands the decision made.

**Takeaway:** When dealing with vulnerable clients making key MPF decisions, intermediaries must implement specific safeguards—either witnessing or independent post-sale calls—and maintain comprehensive records of these actions for a seven-year period. Therefore, statements I, III and IV are correct.

Correct: Under the Mandatory Provident Fund Schemes (General) Regulation, the primary investment manager of an MPF scheme or an Approved Pooled Investment Fund (APIF) must be a company incorporated in Hong Kong with a minimum paid-up share capital and net assets of HK$10 million. Additionally, to ensure a robust system of checks and balances, any delegate appointed by the investment manager must remain independent of the scheme’s trustee, the custodian, and any delegates of the custodian. Therefore, statements I and III are accurate.

**Incorrect:** Statement II is incorrect because the investment in warrants is strictly limited to a maximum of 5% of the total funds of a constituent fund or APIF, making a 15% allocation non-compliant. Statement IV is incorrect because the MPF legislation explicitly prohibits the acquisition of partly paid-up shares to protect the scheme from the potential liabilities associated with future capital calls; only fully paid-up shares are permissible.

**Takeaway:** MPF investment management is governed by strict eligibility criteria for managers, including local incorporation and capitalization requirements, while permissible investments are restricted by specific caps (such as 5% for warrants) and prohibitions on high-risk structures like partly paid-up shares. I and III only.

Correct: Statements I, II, and III accurately reflect the regulatory framework of the MPF system. Employees of the European Union Office are specifically listed as exempt persons, but the law stipulates that if they earn income from other employment or self-employment, that additional income is not exempt. Employers of regular (non-casual) employees must fulfill their enrolment duties within the 60-day permitted period. Furthermore, self-employed persons (SEPs) are required to enroll in an MPF scheme within 60 days of commencing business, regardless of their income level, although the actual obligation to contribute only triggers once they meet the minimum income threshold.

**Incorrect:** Statement IV is incorrect because the statutory deadline for an MPF trustee to issue a notice of participation is within 30 days of the applicant submitting all required information or agreeing to the scheme’s governing rules, whichever is later. The 60-day period mentioned in the statement is the timeframe for enrolment, not for the trustee’s administrative notification.

**Takeaway:** While certain specific roles are exempt from MPF, individuals must still account for other non-exempt income sources. Enrolment for regular employees and self-employed persons must occur within 60 days, while trustees have a 30-day window to confirm participation once all documentation is received. Therefore, statements I, II and III are correct.

Correct: Statement II is correct because guaranteed funds often require members to meet specific criteria, such as a minimum holding period, to qualify for the guarantee; transferring out early may result in losing these benefits. Statement III accurately describes the statutory duty of the original (transferor) trustee to process the transfer within 30 days of notification. Statement IV is correct as it highlights the ‘time lag’ risk where benefits are held in cash during the transition between trustees, potentially leading to unfavorable market timing outcomes.

**Incorrect:** Statement I is incorrect because MPF funds utilize a ‘forward pricing’ mechanism. Under this system, the unit price is calculated based on the fund’s net asset value at the close of the market on the valuation day, meaning members cannot specify or lock in a particular price when they submit their transfer request.

**Takeaway:** When electing to transfer MPF benefits, members must consider the risks associated with the out-of-market time lag and the potential loss of specific fund guarantees, while trustees are bound by a 30-day window to execute the transfer. Therefore, statements II, III and IV are correct.

Correct: Statements I, II, and IV are accurate according to the Mandatory Provident Fund Schemes Ordinance (MPFSO). Mandatory contributions, whether made by the employer or the employee, are fully and immediately vested in the scheme member as accrued benefits. This immediate vesting also applies to any investment income or profits derived from those mandatory contributions. Additionally, unlike mandatory contributions, the vesting of employer voluntary contributions is not fixed by law but is instead determined by the specific governing rules of the individual MPF scheme.

**Incorrect:** Statement III is incorrect because the Employee Choice Arrangement (ECA) has specific limitations regarding portability. While the ECA allows employees to transfer benefits once every calendar year, this right only applies to the accrued benefits derived from the employee’s own mandatory contributions made during their current employment. The employer’s portion of mandatory contributions must remain in the contribution account selected by the employer until the employee leaves that job.

**Takeaway:** In the MPF system, mandatory contributions and their investment returns vest immediately, but portability under the ECA is restricted to the employee’s portion of mandatory contributions, while employer voluntary contributions follow scheme-specific vesting scales. Therefore, statements I, II and IV are correct.

Correct: Commissions based on the number or amount of transactions (such as client referrals or IPO placements) are classified as relevant income for MPF purposes. Furthermore, cash payments provided by an employer to cover expenses like fuel, maintenance, or license fees for a vehicle owned by the employee are considered relevant income because they constitute a cash benefit provided for the employee’s advantage.

**Incorrect:** Payment in lieu of notice is excluded from relevant income as it does not fall within the nine specific categories (wages, salary, leave pay, fee, commission, bonus, gratuity, perquisite, or allowance) defined in the Mandatory Provident Fund Schemes Ordinance. Statutory severance payments and long service payments are also specifically excluded from the definition of relevant income by law.

**Takeaway:** For MPF purposes, relevant income generally encompasses most monetary rewards arising from employment, but excludes non-monetary benefits, statutory severance or long service payments, and payments in lieu of notice. Therefore, statements II and III are correct.

Correct: Statement I is correct because the Mandatory Provident Fund (MPF) legislation allows the governing rules of specific schemes to determine the vesting, preservation, portability, and withdrawal terms for voluntary contributions, unlike mandatory contributions which are strictly regulated by law. Statement II is correct because the minimum relevant income level for employee contributions is currently $7,100; however, the employer is still obligated to pay the 5% mandatory contribution for any employee earning below this threshold (but above $0). Statement III is correct because mandatory contributions are capped at 5% of the maximum relevant income level, which is currently $30,000, resulting in a maximum contribution of $1,500 each for the employer and employee.

**Incorrect:** Statement IV is incorrect because the statutory period for an employer to enrol a regular employee into an MPF scheme is within 60 days of the commencement of employment, not 30 days.

**Takeaway:** While mandatory contributions are subject to rigid statutory requirements regarding income floors, caps, and withdrawal, voluntary contributions provide additional flexibility as their specific terms are governed by the rules of the chosen MPF scheme. Therefore, statements I, II and III are correct.

Correct: The Mandatory Provident Fund Schemes Authority (MPFA) is granted broad statutory powers to ensure the integrity of the MPF system. These powers include the ability to order a trustee to take remedial action (I), conduct formal investigations (II), and impose financial penalties that are proportionate to the severity of the breach (III). Furthermore, the MPFA can suspend a trustee’s administration of a scheme and appoint a temporary substitute to protect the interests of scheme members (IV).

**Incorrect:** All the statements provided (I, II, III, and IV) accurately reflect the regulatory tools available to the MPFA as outlined in the governing legislation. There are no incorrect statements in this selection, as they all represent valid administrative or enforcement actions the MPFA may take against a non-compliant trustee.

**Takeaway:** The MPFA’s enforcement framework is designed to be flexible and proportionate, allowing for various levels of intervention ranging from remedial instructions and financial penalties to the suspension or revocation of a trustee’s approval. Therefore, all of the above statements are correct.