Mandatory Provident Fund Quiz 13

Correct: Under the MPFA Guidelines on Conduct Requirements, a client with a primary level of education or below is classified as a vulnerable client when making key decisions, such as transferring accrued benefits out of a guaranteed fund. To fulfill the ‘extra care’ requirement, the registered intermediary must offer the client the option to be accompanied by a companion or to have an additional staff member witness the sales and selection process. The intermediary must document that these choices were offered, record the client’s selection, obtain the client’s signature on the document, and provide them with a copy. This documentation must be retained by the principal intermediary for a minimum of seven years.

**Incorrect:** A post-sale call is an acceptable alternative to the witness requirement, but it must be conducted within seven working days, not fourteen, and it must be performed by an authorized person other than the subsidiary intermediary who handled the original transaction. Requiring a family member to act as a legal guarantor is not a requirement under the MPF conduct guidelines for vulnerable clients. While providing simplified information is good practice, it does not satisfy the specific regulatory requirements for ‘extra care’ which mandate either the witnessing process or a formal, recorded post-sale call.

**Takeaway:** When a vulnerable client makes a key decision—such as transferring out of a guaranteed fund—the intermediary must provide additional support through either a witnessed selection process or a recorded post-sale call conducted by an independent authorized person within seven working days.

Correct: Statements I, II, and III accurately reflect the sequential enforcement steps outlined in the Mandatory Provident Fund Schemes Ordinance (MPFSO) for training non-compliance. The process begins with a formal written notice allowing at least 30 days for completion, followed by potential suspension of registration if the notice is ignored, and finally revocation if the requirement remains unfulfilled 30 days after the suspension begins.

**Incorrect:** Statement IV is incorrect because the Mandatory Provident Fund Schemes Authority (MPFA) is the exclusive authority for imposing disciplinary sanctions on registered intermediaries. While Frontline Regulators (FRs) such as the SFC, HKMA, or IA conduct inspections and investigations, they do not have the power to independently issue sanctions; their findings are instead submitted to the MPFA for a final decision.

**Takeaway:** The MPFSO establishes a clear, time-bound disciplinary progression for training failures, where the MPFA holds the sole power to suspend or revoke registration, while Frontline Regulators support the process through investigation. I, II & III only. Therefore, statements I, II and III are correct.

Correct: Statement I is correct because the Mandatory Provident Fund Schemes (General) Regulation specifies that a registered trust company acting as a custodian must generally maintain a paid-up share capital and net assets of at least HK$150 million each, though a lower threshold of HK$50 million is permissible if other regulatory requirements are met. Statement III is correct because the 60-day employment rule, which applies to most relevant employees, is specifically waived for “casual employees” in the catering and construction industries to ensure coverage in sectors with high labor mobility.

**Incorrect:** Statement II is incorrect because participation in an Industry Scheme is optional for employers in the catering and construction sectors; they are free to enroll their employees in a Master Trust Scheme instead. Statement IV is incorrect because the custodian’s primary role is the safekeeping and physical holding of scheme assets (the “care” of assets), whereas the responsibility for investment decisions and portfolio management lies with the investment manager.

**Takeaway:** While most employees must meet a 60-day employment threshold for MPF coverage, casual workers in the construction and catering industries are covered immediately. Furthermore, custodians serve as the guardians of scheme assets and must satisfy significant capital requirements to ensure financial stability. Therefore, statements I and III are correct.

Correct: According to the Guidelines on Conduct Requirements for Registered Intermediaries, intermediaries must adhere to several core principles to ensure the protection of scheme members. These include acting honestly, fairly, and in the best interests of the client (I), disclosing any material interests or potential conflicts of interest (II), providing the client with all information necessary to make an informed decision (III), and performing their duties with the level of care, skill, and diligence expected of a professional (IV).

**Incorrect:** Options that exclude any of these four requirements are incorrect because these duties are not mutually exclusive; they are concurrent obligations. For instance, an intermediary cannot claim to have acted with care and skill (IV) if they failed to disclose a conflict of interest (II) or withheld necessary information (III).

**Takeaway:** The regulatory framework for MPF intermediaries is built on the pillars of integrity, transparency, and professional competence, requiring the fulfillment of all conduct requirements simultaneously. I, II, III & IV. Therefore, I, II, III & IV is correct.

Correct: Under the Mandatory Provident Fund (MPF) system, mandatory contributions are subject to a maximum relevant income level, which is currently capped at $30,000 per month. For an employee earning $45,000, the mandatory portion for both the employer and the employee is 5% of the $30,000 cap, resulting in $1,500 each. Since the employer has agreed to contribute 5% of the total salary ($2,250), the amount exceeding the mandatory cap ($2,250 – $1,500 = $750) is classified as a voluntary contribution. Because the employee only wishes to contribute the legal minimum, they are only required to pay the capped mandatory amount of $1,500.

**Incorrect:** It is incorrect to state that both parties make a mandatory contribution of $2,250, as any amount above the statutory cap of $1,500 is voluntary by definition. Similarly, the employee is not legally required to match the employer’s voluntary portion; they may choose to contribute only the mandatory minimum. Finally, income exceeding the statutory limit is never ‘forfeited’; it simply falls outside the mandatory contribution requirement and can be paid into the scheme as voluntary contributions if the parties agree.

**Takeaway:** Mandatory MPF contributions are capped at a specific maximum relevant income level (currently $30,000); any contributions made by an employer or employee based on income above this threshold are legally treated as voluntary contributions and are subject to the governing rules of the specific scheme.

Correct: Statements I, II, and III are correct. According to Section 34J of the MPFSO, a principal applicant must be a Type A regulatee whose qualification is not currently suspended. Furthermore, Section 34T(2) stipulates that an application for registration as a principal intermediary must be accompanied by applications for the attachment of a subsidiary intermediary and the approval of that individual as a responsible officer (RO). If the intended RO is not yet registered as a subsidiary intermediary, an application for their registration must be submitted concurrently with the principal intermediary application.

**Incorrect:** Statement IV is incorrect because the penalty for the unauthorized use of protected titles (such as “principal intermediary” or “subsidiary intermediary”) under the MPFSO is a fine of $100,000 and a further daily fine for continuing offences, but it does not include a provision for imprisonment. Imprisonment (up to 2 years on indictment or 6 months on summary conviction) is only applicable to the offence of actually carrying on regulated activities without the required registration.

**Takeaway:** The registration process for an MPF principal intermediary is integrated; it requires the applicant to be a valid Type A regulatee and must include the simultaneous appointment of a responsible officer and the attachment of a subsidiary intermediary. Legal penalties under the MPFSO distinguish between the unauthorized performance of regulated acts and the mere unauthorized use of professional titles. Therefore, statements I, II and III are correct.

Correct: In the Mandatory Provident Fund (MPF) system, while most relevant employees must be employed for a continuous period of at least 60 days to be covered, this rule does not apply to “casual employees” within the catering and construction industries. For these specific sectors, employers must enroll casual workers in an MPF scheme regardless of the duration of their employment, even if it is for a single day, to accommodate the high labor mobility and daily wage practices of these industries.

**Incorrect:** The suggestion that a 60-day minimum employment period applies to all workers is incorrect because it ignores the specific legal carve-out for casual employees in designated industries. Furthermore, while an employer has the choice between using an Industry Scheme or a Master Trust Scheme, the act of enrolling an eligible employee into a scheme is a mandatory legal requirement, not an optional one. Finally, the location of work or the specific number of hours worked does not exempt a relevant employee from coverage if they meet the age and employment criteria.

**Takeaway:** The 60-day employment rule is the standard threshold for MPF coverage, but casual employees in the construction and catering industries are covered from their first day of employment due to the nature of their work patterns.

Correct: The statutory regime for MPF intermediaries, which commenced on 1 November 2012, was designed to provide a formal legal framework for the regulation of sales and marketing activities. By moving from an administrative system to a statutory one, the framework ensures that intermediaries are held to high professional standards under a lead regulator model involving the MPFA and frontline regulators, which ultimately serves to strengthen the protection of scheme members’ interests.

**Incorrect:** The claim that the regime relies solely on voluntary industry codes is inaccurate because the 2012 framework is statutory, meaning the requirements are legally binding and enforceable. Furthermore, the MPFA does not act as the sole regulator in isolation; instead, it coordinates with frontline regulators such as the HKMA, SFC, and IA to supervise the conduct of intermediaries based on their existing industry registrations.

**Takeaway:** The 2012 statutory regime for MPF intermediaries provides a robust legal framework to oversee marketing conduct and protect members through a multi-agency regulatory approach involving (i), (ii), and (iii) only.

Correct: Bondholders are creditors of the issuing organization rather than owners. In the event of a corporation’s liquidation or bankruptcy, bondholders have a higher priority claim on the remaining assets and must be paid before any distributions are made to stockholders. Furthermore, bond prices generally exhibit an inverse relationship with market interest rates; when interest rates decline, the fixed coupon payments of existing bonds become more valuable, leading to an increase in the bond’s market price.

**Incorrect:** Equities are typically categorized as higher-risk instruments compared to bonds because their value is more volatile and they represent a residual claim on assets. Zero-coupon bonds are defined by the fact that they do not make periodic interest (coupon) payments, but are instead issued at a discount to their par value. Unlike stockholders, bondholders do not possess ownership interests or voting rights in the issuing corporation, as their relationship is strictly that of a lender to a borrower.

**Takeaway:** A fundamental principle of investment instruments is that debt holders (bondholders) have seniority over equity holders (stockholders) during liquidation, and bond valuations are sensitive to interest rate fluctuations in an inverse manner.

Correct: The calculation of the Net Asset Value (NAV) per unit for an MPF constituent fund requires a comprehensive accounting of all assets and liabilities. According to regulatory standards, the process involves summing the aggregate market value of the fund’s underlying investments (Statement I) and its cash holdings (Statement II). From this total, all accrued administrative and management expenses (Statement III) must be deducted to determine the total Net Asset Value. This final net figure is then divided by the total number of units issued (Statement IV) to arrive at the NAV per unit.

**Incorrect:** Excluding any of these elements would result in an incorrect unit price. For example, failing to deduct accrued expenses would artificially inflate the fund’s value, while ignoring cash balances would undervalue the fund. The calculation must be performed after all fees payable to date have been accounted for to ensure scheme members are transacting at a fair and accurate price.

**Takeaway:** The formula for determining the NAV per unit of an MPF fund is: (Total Market Value of Investments + Cash – Accrued Expenses) / Number of Units Issued. All of the above. Therefore, all of the above statements are correct.

Correct: The MPF system is specifically designed to align with the World Bank’s second pillar of retirement protection. This pillar is characterized by being mandatory for the workforce, privately managed by approved trustees, and fully funded, meaning the benefits are derived from the contributions and investment returns accumulated within individual accounts rather than being paid out of current tax revenue.

**Incorrect:** A zero-pillar system describes a non-contributory, publicly-financed social safety net intended to provide a minimal level of protection, such as social welfare. The third pillar refers to voluntary personal savings and investments that individuals choose to make beyond mandatory requirements. A first-pillar system is typically a publicly-managed and financed social security scheme, which differs from the MPF’s private management structure.

**Takeaway:** Within the World Bank’s multi-pillar framework, the MPF system functions as the second pillar, providing a mandatory, employment-based, and privately-managed foundation for retirement savings in Hong Kong.

Correct: Under the MPF regulatory framework, the Fund Fact Sheet (FFS) serves as a standardized “report card” for each constituent fund within a scheme. It is required to be issued on a half-yearly basis. The document provides essential summary information that allows members to evaluate the fund, including its investment objectives, portfolio allocation, top holdings, fund size, performance data, the fund expense ratio (FER), a risk indicator, and a commentary on the future outlook of the fund.

**Incorrect:** The suggestion that the report is issued monthly or focuses on individual account balances is incorrect, as those details are typically found in an Annual Benefit Statement or through real-time online account access. While marketing and offering documents must disclose the specific qualifying conditions for a “soft guarantee,” the Fund Fact Sheet is a summary performance report rather than the primary legal disclosure for guarantee mechanisms. Additionally, the FFS is not the vehicle for reporting statutory changes to relevant income levels, nor is it required to be updated on a quarterly basis.

**Takeaway:** The Fund Fact Sheet is a key transparency tool issued every six months that provides scheme members with a concise overview of a constituent fund’s costs, risks, and investment performance.

Correct: Statements I, III, and IV are correct. Private piano teachers are classified as self-employed persons (SEPs) and are generally required to join an MPF scheme. Bodyguards employed by individuals are covered because their services are not considered to be rendered within a residential premises in the same manner as domestic servants. Employees who work in Hong Kong for a Hong Kong-engaged business are covered by the MPF System regardless of whether they reside outside of Hong Kong (e.g., commuting from Shenzhen).

**Incorrect:** Statement II is incorrect because domestic employees, such as gardeners, baby sitters, and domestic servants, are specifically excluded from MPF coverage if their services are rendered at the employer’s residential household. This is a statutory exemption under the MPF legislation for domestic employees working in a residential setting.

**Takeaway:** MPF coverage is determined by the nature of the employment contract and the location of service; while most employees and self-employed persons in Hong Kong are covered, specific exemptions apply to domestic employees working in residential premises and certain short-term overseas workers. Therefore, statements I, III and IV are correct.

Correct: Statements I, II, and III accurately reflect the regulatory requirements for a principal intermediary (PI) under the Mandatory Provident Fund Schemes Ordinance and related guidelines. A PI is legally required to ensure that its responsible officer (RO) has sufficient authority and resources to carry out their duties. Furthermore, the PI must maintain a rigorous framework to ensure only registered individuals perform regulated activities and must keep detailed records of the training completed by its subsidiary intermediaries (SIs), including evidence of attendance, for a minimum of three years.

**Incorrect:** Statement IV is incorrect because the regulatory framework does not mandate a uniform, identical set of controls for all firms. Instead, the guidelines specify that the appropriate controls and procedures depend on several factors, including the scale of the PI’s operations, the number of attached SIs, and the specific types of regulated activities being conducted. A larger firm with more SIs would generally require more complex and extensive monitoring systems than a smaller boutique firm.

**Takeaway:** While the core compliance obligations are mandatory for all principal intermediaries, the specific design and implementation of internal controls should be proportional to the scale and complexity of the intermediary’s MPF business operations. Therefore, statements I, II and III are correct.

Correct: For new eligible employees who join a company after an MPF exemption has been granted to its ORSO registered scheme, the employer has the discretion to decide which retirement options to provide. The employer may choose to offer the new employee a choice between the MPF-exempted ORSO scheme and an MPF scheme, or they may decide to enroll the new employee in only one of the two schemes. Unlike the mandatory one-off option that must be given to existing members at the time the MPF system was introduced or when a new exemption is obtained, the employer retains the right to determine the benefit structure for subsequent hires.

**Incorrect:** It is incorrect to suggest that the law mandates a choice for every new hire; the mandatory choice requirement specifically applied to ‘existing members’ at the time of the interface. Furthermore, it is not true that new employees are prohibited from joining MPF-exempted ORSO schemes; they are eligible as long as the employer chooses to offer that option. Finally, there is no regulatory requirement to enroll an employee in both types of schemes simultaneously, as the MPF exemption is designed to allow the ORSO scheme to act as a substitute for MPF participation.

**Takeaway:** While existing members must be given a one-off option to choose between an MPF-exempted ORSO scheme and an MPF scheme, for new employees, the employer has the power to decide whether to offer a choice or to restrict enrollment to a specific scheme.

Correct: According to the Mandatory Provident Fund Schemes Ordinance, both principal and subsidiary intermediaries are required to notify the MPFA in writing of specific changes, including changes to their name, address, or contact details. This notification must be made within 7 working days after the change occurs to ensure the regulatory register remains accurate.

**Incorrect:** A 14-working-day period is not the standard for reporting administrative changes under the MPF intermediary requirements. Using calendar days instead of working days is incorrect as the legislation specifically defines the period in working days. The 30-day or one-month timeframe typically applies to the payment of annual fees or the submission of annual returns, rather than the reporting of personal detail changes.

**Takeaway:** Registered intermediaries must notify the MPFA of changes to their contact information or registration status within 7 working days; failure to do so without a reasonable excuse is an offence liable to a fine.

Correct: Statements I, II, and IV accurately reflect the requirements under the MPFA Guidelines on Conduct for Registered Intermediaries regarding risk mismatch. When a client selects a fund with a higher risk level than their assessed profile, the intermediary must explain the mismatch and the fund’s risks, document the client’s specific reasons for the choice, and obtain a signature on the acknowledgment. Additionally, to ensure a proper audit trail, the conversation must be audio-recorded or, in the absence of recording facilities, followed up with a post-sale call or confirmation.

**Incorrect:** Statement III is incorrect because the regulatory requirement for record-keeping in this context is a minimum of seven years, not five years. The principal intermediary is responsible for maintaining the original signed documents for this duration to comply with the MPFA’s conduct standards.

**Takeaway:** Registered intermediaries must strictly adhere to disclosure and documentation protocols when a ‘risk mismatch’ occurs, ensuring that the client’s decision is voluntary, informed, and backed by a seven-year audit trail. Therefore, statements I, II and IV are correct.

Correct: Statements I, II, and III are accurate according to the Mandatory Provident Fund Schemes Ordinance. If a self-employed person’s (SEP) most recent notice of assessment is older than two years, they must declare their relevant income based on the previous year’s assessable profits. SEPs who suffer a net loss in their business are permitted to discontinue mandatory contributions by lodging a statement with the trustee until their income once again exceeds the minimum threshold. Furthermore, if an SEP fails to provide evidence of income and the trustee is not satisfied with the explanation, the law stipulates that the relevant income will be assessed at the maximum statutory level of $360,000 per year.

**Incorrect:** Statement IV is incorrect because the 60-day permitted period for an SEP to join an MPF scheme is not strictly fixed. Under the Interpretation and General Clauses Ordinance, if the final day of the permitted period falls on a Saturday, a public holiday, or a day with a gale or black rainstorm warning, the period is legally extended to the next following day that does not fall under those categories.

**Takeaway:** Self-employed persons must navigate specific rules for income assessment, including the use of declarations for outdated assessments and the default application of maximum income levels when evidence is insufficient and the trustee is unsatisfied. I, II & III only. Therefore, statements I, II and III are correct.

Correct: Statement I is accurate because the Mandatory Provident Fund Schemes (General) Regulation specifies that a registered trust company acting as a custodian must generally maintain a paid-up share capital and net assets of at least $150 million each, though this can be reduced to $50 million under specific conditions. Statement IV is correct as the defining characteristic of a Master Trust Scheme is the pooling of contributions from various unrelated employers and self-employed persons to achieve administrative and investment efficiency through economies of scale.

**Incorrect:** Statement II is incorrect because participation in an Industry Scheme is optional; employers in the catering and construction sectors may choose to participate in a Master Trust Scheme instead. Statement III is incorrect because the 60-day employment rule is specifically waived for casual employees within the two designated industries (catering and construction) to accommodate their high labor mobility.

**Takeaway:** MPF intermediaries must distinguish between the different scheme types and understand that while Industry Schemes offer portability for casual workers, they are not mandatory for employers. Furthermore, custodians must meet stringent financial requirements to ensure the safety of scheme assets. I & IV only. Therefore, statements I and IV are correct.

Correct: Relevant income for MPF purposes encompasses various forms of monetary remuneration arising from employment, including commissions based on the number or amount of transactions and specific cash payments made by an employer for the benefit of an employee. In this context, commissions and the employer’s payment of car registration and license fees for a vehicle owned by the employee are classified as relevant income because they represent monetary perquisites or allowances.

**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 under the Mandatory Provident Fund Schemes Ordinance. Furthermore, gains realized from the exercise of share options are specifically treated as non-monetary benefits and are not included in the calculation of relevant income.

**Takeaway:** When identifying relevant income, it is crucial to distinguish between monetary payments related to employment services and excluded items such as statutory termination payments, non-monetary benefits, or specific investment-related gains. The correct combination is I & II only. Therefore, statements I and II are correct.

Correct: Under the Mandatory Provident Fund Schemes Ordinance, it is a statutory requirement for every MPF scheme to offer at least one MPF Conservative Fund, which serves as a low-risk investment option for members. Regarding transparency, the Fee Table in the scheme’s offering document must be comprehensive, detailing all fees, their current amounts, their purposes, and identifying the party responsible for payment (e.g., the member or the fund). Additionally, the regulatory framework allows for various structures for Approved Pooled Investment Funds (APIFs), which include authorized unit trusts, mutual funds, and insurance policies.

**Incorrect:** Statement IV is incorrect because the regulations do not mandate that every constituent fund be accessible to all members. In fact, the law specifically allows for the investment in a constituent fund to be restricted to certain groups of MPF scheme members, which is a common feature in employer-sponsored schemes or specific sub-categories of funds.

**Takeaway:** MPF trustees must ensure that schemes provide a mandatory Conservative Fund and maintain high standards of fee disclosure, while understanding that constituent funds can be structured with restricted access for specific member groups. Therefore, statements I, II and III are correct.

Correct: According to the Guidelines on Conduct Requirements for Registered Intermediaries (Section 34ZL(1)(d)), intermediaries are required to take all reasonable steps to establish the client’s financial situation, investment experience, and investment objectives. If a client refuses to provide the necessary information for a suitability assessment, the intermediary must explain to the client that the lack of information will hinder the assessment of suitability and that any advice or recommendation provided may not be appropriate for the client’s specific needs. In some cases, the intermediary may need to refrain from providing a recommendation altogether.

**Incorrect:** Proceeding with a recommendation based on generic assumptions like age or industry averages is a violation of the suitability requirement, as it fails to account for the client’s actual financial capacity and risk tolerance. Furthermore, the statutory conduct requirements imposed by the Mandatory Provident Fund Schemes Ordinance are mandatory; an intermediary cannot bypass these legal obligations by having a client sign a waiver or disclaimer.

**Takeaway:** When a client withholds information essential for a suitability assessment, the intermediary’s primary responsibility is to inform the client of the limitations this imposes on the advisory process and ensure the client understands why the recommendation may be restricted.

Correct: To qualify for a withdrawal of accrued benefits on the ground of a small balance, a scheme member must satisfy several specific criteria. These include having a balance that does not exceed $5,000 in the MPF scheme, ensuring that at least 12 months have passed since the last contribution day for which a mandatory contribution was required, and declaring an intention not to become employed or self-employed again. Crucially, the member must also provide a statutory declaration confirming that they do not hold any accrued benefits in any other MPF schemes.

**Incorrect:** A medical certificate is a requirement for claims based on total incapacity or terminal illness, but it is not relevant to a small balance claim. The small balance provision is an independent ground for withdrawal and does not require the member to reach the early retirement age of 60. Proof of permanent departure is the primary requirement for a different ground of early withdrawal and is not a condition for the small balance provision.

**Takeaway:** A valid small balance withdrawal requires the member to meet specific financial and employment thresholds, including a maximum balance of $5,000, a 12-month period of inactivity, and the absence of any other MPF accounts.

Correct: Statements I, III, and IV are accurate according to the Occupational Retirement Schemes Ordinance (ORSO) and its interface with the MPF system. Hybrid schemes, which combine features of both defined contribution and defined benefit schemes, are legally classified as defined benefit schemes. ORSO exempted status is specifically available for offshore schemes that meet certain criteria or those with a very limited number of members who are Hong Kong permanent identity card holders. Additionally, an MPF exemption certificate allows both the employer and the relevant employees to be exempt from the mandatory contribution requirements of the MPF system.

**Incorrect:** Statement II is incorrect because schemes established by or contained in any ordinance other than the ORSO (such as an MPF scheme established under the Mandatory Provident Fund Schemes Ordinance) are specifically excluded from the requirement to apply for ORSO registration or exemption.

**Takeaway:** Intermediaries must be able to distinguish between the various classifications of ORSO schemes and their specific exemption statuses to ensure proper compliance for employers and employees. I, III & IV only. Therefore, statements I, III and IV are correct.

Correct: Statements I and III are accurate reflections of the MPF safety net. Professional indemnity insurance is a mandatory requirement for trustees to cover losses arising from fraud or professional negligence by the trustee or its delegates. Furthermore, to ensure financial robustness, the Mandatory Provident Fund Schemes Ordinance requires that an approved trustee must maintain a minimum paid-up share capital and net assets of HK$150 million.

**Incorrect:** Statement II is incorrect because the Compensation Fund is specifically designed as a fund of “last resort,” meaning it is only accessed after professional indemnity insurance has been utilized or if such insurance is insufficient. Statement IV is incorrect because the statutory safety net, including professional indemnity insurance, does not provide coverage for investment losses incurred through the ordinary course of market fluctuations or business risks.

**Takeaway:** The security of MPF scheme assets is maintained through a multi-layered framework including high capital entry barriers for trustees, mandatory professional indemnity insurance for operational risks, and a statutory compensation fund for cases of misfeasance, though market-based investment losses remain the responsibility of the member. Therefore, statements I and III are correct.

Correct: Under the MPFSO, the Monetary Authority (MA) is the designated Frontline Regulator for all principal intermediaries that are authorized institutions, regardless of whether they also engage in insurance or securities business. Because subsidiary intermediaries are regulated by the same Frontline Regulator as their principal intermediary, the MA is responsible for the supervisory and investigatory functions regarding their MPF conduct.

**Incorrect:** The Insurance Authority and the Securities and Futures Commission only act as Frontline Regulators for intermediaries that are not authorized institutions. While the Mandatory Provident Fund Schemes Authority (MPFA) is the body that takes final disciplinary action, the actual investigation and frontline supervision are delegated to the assigned industry regulator.

**Takeaway:** The Monetary Authority is the sole frontline regulator for MPF intermediaries that are banks, and this oversight extends to all subsidiary intermediaries and responsible officers operating under that bank’s registration.