Mandatory Provident Fund Quiz 16

Correct: Under the Mandatory Provident Fund Schemes Ordinance, approved trustees have a statutory duty to monitor the payment of contributions. If an employer fails to pay the mandatory contribution by the contribution day, the trustee is required to report the default to the MPFA within 10 days. The MPFA may then take action to recover the arrears and impose a contribution surcharge at a flat rate of 5% of the amount in arrears, which is credited to the scheme members’ accounts.

**Incorrect:** The financial penalty for defaulting on contributions is not capped at a fixed $5,000; rather, it is calculated as the higher of $5,000 or 10% of the mandatory contributions in arrears. Additionally, the Compensation Fund provides protection for accrued benefits derived from both mandatory and voluntary contributions equally, so it is incorrect to state that voluntary contributions are excluded from this coverage.

**Takeaway:** I and II only.

Correct: Under the Mandatory Provident Fund Schemes Ordinance (MPFSO), an applicant for registration as a subsidiary intermediary must be a Type B regulatee of an industry regulator (such as a ‘relevant individual’ at a bank) and must not be a Type A regulatee. Additionally, section 34U(2) mandates that the application must be accompanied by a principal intermediary’s application for approval of attachment, as subsidiary intermediaries are required to be attached to a principal firm to perform regulated activities.

**Incorrect:** Type A regulatees refer to the institutional entities (like authorized financial institutions or licensed corporations) that serve as principal intermediaries, not the individuals. The standard requirement for the qualifying examination is that it must be passed within one year prior to the application, rather than three years. Furthermore, the MPF regulatory framework does not permit individuals to register independently; an attachment to a principal intermediary is a mandatory requirement for the application process.

**Takeaway:** To successfully register as a subsidiary intermediary, an individual must qualify as a Type B regulatee and ensure their application is submitted in conjunction with an attachment application from a principal intermediary.

Correct: Service charges collected by the employer and subsequently distributed to employees are classified as relevant income. This includes amounts added to credit card bills or service charges included in the total bill, as the employer acts as the intermediary in the collection and distribution process, making it part of the employee’s earnings arising from employment.

**Incorrect:** Tips paid directly to an employee by a customer without any employer intervention (such as money left on a table) are not considered relevant income. Marriage gifts are payments for significant personal events and are excluded from the definition. Severance payments and long service payments are specifically and legally excluded from the definition of relevant income under the Mandatory Provident Fund Schemes Ordinance.

**Takeaway:** For MPF purposes, relevant income includes monetary rewards like wages and employer-handled tips, but excludes direct tips, non-monetary benefits, and specific statutory payments like severance or long service pay.

Correct: Statement I is correct because new members who join an MPF exempted ORSO registered scheme are subject to preservation, portability, and withdrawal requirements regarding their “minimum MPF benefits” (MMB), meaning these benefits generally cannot be accessed until age 65 or other statutory grounds. Statement III is correct because the MPFA provides an exemption from prior approval requirements for the appointment of a Registered Trust Company (RTC); instead, the employer must simply notify the MPFA in writing within one month of the appointment.

**Incorrect:** Statement II is incorrect because the regulations explicitly state that a trustee cannot forfeit a member’s MMB upon dismissal for cause, regardless of whether they are an existing or new member. Statement IV is incorrect because the definition of MMB is the “lesser of” (not the greater of) the member’s accrued benefits or the formula-based amount (1.2 x final average monthly relevant income x years of post-MPF service).

**Takeaway:** New members of MPF exempted ORSO schemes must treat their Minimum MPF Benefits (MMB) with the same preservation discipline as standard MPF benefits, and employers must adhere to specific notification or approval timelines when changing scheme trustees depending on the trustee’s registration status. Therefore, statements I and III are correct.

Correct: According to the MPFA Guidelines on Conduct (Section III.3), a registered intermediary is required to ensure that any form to be signed by a client is duly completed in all material respects before the client’s signature is requested. Additionally, the principal intermediary must maintain a copy of the completed form for a minimum period of seven years, and this record must be readily accessible to frontline regulators for inspection purposes. Any alterations made to the form must be initialed by the client or otherwise authenticated to confirm they represent the client’s instructions.

**Incorrect:** It is a violation of conduct requirements to have a client sign a blank or partially completed form, regardless of whether the intermediary intends to fill it in accurately later. Using correction fluid or making changes without the client’s initials is not permitted, as all alterations must be authenticated by the client. Furthermore, the mandatory retention period for such records is seven years, making any shorter duration, such as three or five years, non-compliant with the guidelines.

**Takeaway:** To maintain integrity and protect client interests, MPF forms must be fully completed before signing, any changes must be client-authenticated, and records must be preserved by the principal intermediary for at least seven years.

Correct: Statements I, II, III, and IV are all accurate reflections of the administrative rules under the Mandatory Provident Fund Schemes Ordinance (MPFSO). For postal payments, the law looks at when the cheque would normally be delivered, not the postmark. For self-employed persons (SEPs) using direct debit without a statement, the trustee’s instruction date is the trigger. Direct credit is only considered paid when the scheme’s account is actually credited, and electronic submissions of remittance statements are recognized on the date of transmission.

**Incorrect:** All statements provided are correct. Common errors in practice include assuming the date a cheque is written or the date a bank transfer is initiated counts as the payment date; however, the regulations specifically require the funds to be available to the scheme or the statement to be received/delivered according to the specified methods.

**Takeaway:** Employers and SEPs must account for processing and delivery times associated with their chosen payment method to ensure that contributions and remittance statements are legally considered “paid” or “received” on or before the contribution day. Therefore, all of the above statements are correct.

Correct: Statements I, II, and III accurately reflect the regulatory requirements for the interface between ORSO and MPF systems. When an employer operates an MPF-exempted ORSO registered scheme, they are legally required to provide new eligible employees with a one-time option to choose between that scheme and an MPF scheme. For those who join the ORSO scheme, the “Minimum MPF Benefits” (MMB) must be preserved according to MPF-like standards. The MMB is calculated based on a specific formula involving the member’s years of service and salary during the period the scheme was MPF-exempted.

**Incorrect:** Statement IV is incorrect because the default mechanism is designed to ensure immediate compliance with the Mandatory Provident Fund Schemes Ordinance. If an employee fails to exercise their option within the statutory 30-day period, the employer must enroll the employee in an MPF scheme, not the ORSO scheme.

**Takeaway:** In the interface arrangement, new employees are granted a one-time choice; however, choosing the ORSO option necessitates the preservation of Minimum MPF Benefits (MMB) to ensure that retirement protection is not compromised compared to the standard MPF system. Therefore, statements I, II and III are correct.

Correct: According to the MPFA Guidelines, the processing of a client’s instruction does not need to wait for the completion of the post-sale call process. If a principal intermediary lacks an audio recording system, they may arrange for an authorized person from the approved trustee, sponsor, or promoter to conduct the call. This arrangement must allow frontline regulators access to the relevant audio records when necessary, and all audio records or related written documentation must be retained for a minimum period of seven years.

**Incorrect:** The suggestion that processing must be suspended until the call is completed is incorrect because the guidelines allow instructions to proceed regardless of the call’s status. There is no regulatory requirement to obtain a written waiver if a client cannot be reached; instead, the intermediary must send a document confirming that offering documents were provided and key features explained. Furthermore, the statutory retention period for these records is seven years, making any shorter duration like two years non-compliant.

**Takeaway:** Registered intermediaries must maintain robust post-sale call records for seven years and ensure regulatory access to these records, even when the calls are outsourced to a trustee or sponsor.

Correct: All four statements accurately reflect the regulatory requirements for principal intermediaries under the MPFA Guidelines. Statement I correctly identifies the 14-working-day window for reporting compliance failures to regulators. Statement II adheres to the specific seven-year record retention requirement for MPF-related audio and written records. Statement III describes the mandatory controls to prevent fraud by prohibiting the receipt of cash or uncrossed cheques by subsidiary intermediaries. Statement IV correctly states that serious complaints, particularly those of a criminal nature like misappropriation or forgery, must be reported to regulators immediately rather than through the standard quarterly summary. Therefore, all of the above statements are correct.

Correct: Statement I is correct because MPF schemes are strictly defined contribution (DC) structures, whereas ORSO schemes have the flexibility to be either defined contribution or defined benefit (DB). Statement II is correct because a fundamental requirement of the MPF system is that all mandatory contributions made by the employer must vest in the member immediately at 100%, while ORSO schemes allow for vesting schedules to be defined by the specific governing rules of the scheme.

**Incorrect:** Statement III is incorrect because, while MPF schemes must be governed by Hong Kong law, ORSO schemes may be governed by laws outside of Hong Kong. Statement IV is incorrect because the deadline for applying for MPF exemption for ORSO schemes was 3 May 2000; currently, new exemptions are generally only granted to successor schemes arising from genuine business transactions or restructuring.

**Takeaway:** A key distinction between the two systems is that MPF is a mandatory, DC-based system with immediate vesting of mandatory contributions, whereas ORSO is a voluntary system that allows for more flexible scheme designs and vesting rules, subject to specific exemption criteria. Therefore, statements I and II are correct.

Correct: Statements I and II are accurate according to the Guidelines on Conduct Requirements for Registered Intermediaries. The Guidelines are issued under section 6H of the MPFSO to provide guidance on the minimum standards of conduct expected of regulated persons who engage in sales, marketing, and giving advice. Furthermore, the three industry regulators (IA, MA, and SFC) act as frontline regulators and are guided by these Guidelines when performing their supervisory and investigatory functions.

**Incorrect:** Statement III is incorrect because the Guidelines are not intended to be an exhaustive description of how to comply; acts or omissions not specifically mentioned may still constitute a breach of performance requirements. Statement IV is incorrect because the Guidelines do not have the force of law and cannot override any legislative provisions or the MPFSO itself.

**Takeaway:** The MPFA Guidelines on Conduct Requirements serve as a regulatory benchmark for minimum standards and assist frontline regulators in supervision, but they remain non-statutory and non-exhaustive in nature. Therefore, statements I and II are correct.

Correct: Statements I and II accurately reflect the provisions of Section 107 of the Securities and Futures Ordinance (SFO), which stipulates that inducing others to participate in an MPF scheme or invest in pooled funds through fraudulent or reckless misrepresentation is a criminal offence, punishable by a HK$1,000,000 fine and 7 years of imprisonment. Statement III is correct as the Guidelines on Conduct Requirements mandate that intermediaries possess a deep understanding of fund features, including fees and risks. Statement IV correctly identifies that a subsidiary intermediary must be a Type B regulatee (an individual) and be attached to a principal intermediary to meet registration standards.

**Incorrect:** Since all four statements are accurate descriptions of the legal and regulatory framework governing MPF intermediaries and the SFO, any option that omits any of these statements is considered incorrect. There are no false statements provided in the list.

**Takeaway:** MPF intermediaries must maintain high standards of professional knowledge and integrity; failing to do so by making reckless or fraudulent claims can lead to severe criminal penalties under the SFO, in addition to regulatory sanctions from the MPFA. Therefore, all of the above statements are correct.

Correct: Statements I and II accurately describe the investment risks associated with the transfer process, specifically the “out-of-market” risk where benefits are not invested during the transition and the “forward pricing” nature of MPF funds. Statement III correctly identifies that switching out of a guaranteed fund might lead to the loss of guaranteed returns if specific conditions (like a minimum holding period) are not met. Statement IV correctly reflects the statutory duty of the transferor (original) trustee to process the transfer within the 30-day timeframe.

**Incorrect:** All statements provided are factually correct according to the MPF legislation and the MPFA’s guidance for scheme members. There are no false statements included in this selection, as they all represent critical factors or regulatory requirements mentioned in the MPF syllabus.

**Takeaway:** When transferring MPF benefits, members must consider market fluctuation risks and fund-specific conditions, while trustees are bound by specific administrative timelines to ensure the efficiency of the transfer. Therefore, I, II, III & IV is correct.

Correct: Statements I, II, and IV are correct. The Mandatory Provident Fund Schemes (Fees) Regulation explicitly prescribes fees for the registration of both principal and subsidiary intermediaries, as well as the approval of responsible officers. The Mandatory Provident Fund Schemes (Exemption) Regulation is the specific subsidiary legislation governing how Occupational Retirement Schemes Ordinance (ORSO) schemes can apply for and maintain exemption from MPF requirements. Furthermore, the Mandatory Provident Fund Schemes (General) Regulation is the comprehensive regulation covering operational details such as the compensation fund and investment standards.

**Incorrect:** Statement III is incorrect because the Code on Disclosure for MPF Investment Funds is not a primary statute. Primary statutes are Ordinances passed by the Legislative Council (such as the MPFSO). Codes and Guidelines are issued by the Mandatory Provident Fund Schemes Authority (MPFA) to supplement the legislation and provide practical guidance for compliance.

**Takeaway:** It is essential to distinguish between the different levels of the MPF regulatory framework: the primary Ordinance provides the legal basis, Regulations (subsidiary legislation) provide operational details, and Codes/Guidelines provide administrative standards and best practices. Therefore, statements I, II and IV are correct.

Correct: Statement I is accurate because, under the Inland Revenue Ordinance, an employer’s total contributions (both mandatory and voluntary) to an MPF scheme or other recognized retirement schemes are tax-deductible up to a limit of 15% of the total annual emoluments of the employees. Statement II is also correct as it reflects the statutory requirement for an approved trustee to notify the MPFA of any default in mandatory contributions within 10 days after the contribution day.

**Incorrect:** Statement III is incorrect because the Compensation Fund is designed to cover accrued benefits derived from both mandatory and voluntary contributions in the same manner. Statement IV is incorrect because the contribution surcharge imposed by the MPFA on arrears is a flat rate of 5%, whereas the 10% figure (or $5,000, whichever is higher) refers to the separate financial penalty that may be imposed.

**Takeaway:** While mandatory and voluntary contributions share certain regulatory protections like the Compensation Fund and investment restrictions, they differ in tax treatment for benefits and have specific reporting and penalty frameworks for defaults. Therefore, statements I and II are correct.

Correct: The Mandatory Provident Fund Schemes (Fees) Regulation is the specific subsidiary legislation that prescribes the types and amounts of fees payable to the MPFA for various administrative and regulatory functions. This includes the registration of principal and subsidiary intermediaries, the approval of responsible officers, and the annual registration fees required to maintain intermediary status.

**Incorrect:** The Mandatory Provident Fund Schemes (General) Regulation covers the operational and investment aspects of MPF schemes, such as contribution and portability rules, rather than the fee schedule for regulatory applications. The Mandatory Provident Fund Schemes (Exemption) Regulation is focused on the requirements and conditions for ORSO schemes to be exempted from MPF requirements. The Code on Disclosure for MPF Investment Funds is a set of guidelines issued by the MPFA to ensure transparency in fund reporting and member-level fees, but it does not govern the administrative fees paid by intermediaries to the Authority.

**Takeaway:** Regulatory costs for applications and registrations within the MPF framework are governed specifically by the Fees Regulation, which supplements the primary MPF Ordinance to ensure the Authority can recover costs for administrative processes.

Correct: Under the Mandatory Provident Fund Schemes Ordinance (MPFSO), if a person provides false or misleading information with an intent to defraud during an investigation, the maximum criminal penalty upon conviction on indictment is a fine of $1,000,000 and imprisonment for 7 years. In addition to criminal proceedings, the MPFA has the power to impose disciplinary orders on regulated persons, which include revoking their approval or registration and ordering a pecuniary penalty. This penalty can be as high as $10,000,000 or three times the profit gained or loss avoided, whichever is greater.

**Incorrect:** A maximum of 2 years of imprisonment applies to cases where false or misleading information is provided knowingly or recklessly, but without the specific intent to defraud. The lower limits of a $100,000 fine and 6 months of imprisonment are applicable only upon summary conviction, not conviction on indictment. Furthermore, the MPFA’s disciplinary powers are not restricted to reprimands or short-term suspensions; they have the statutory authority to permanently revoke approvals and impose significant financial penalties.

**Takeaway:** The presence of an ‘intent to defraud’ significantly increases the maximum prison sentence for providing false information to the MPFA to 7 years, and the Authority possesses broad disciplinary powers to ensure the integrity of the MPF system, including substantial pecuniary penalties.

Correct: Under the Mandatory Provident Fund Schemes Ordinance, the MPFA is granted a wide range of supervisory and enforcement powers to address non-compliance by approved trustees. These include administrative actions such as ordering remedial measures (I), conducting formal investigations (II), and imposing financial penalties that are proportionate to the breach (III). For more severe cases, the MPFA can terminate a trustee’s administration of a scheme or revoke their approval status (IV).

**Incorrect:** All the statements provided are accurate descriptions of the statutory powers available to the MPFA. There are no incorrect statements in this selection, as the legislation allows for a graduated response starting from remedial directions up to the most severe sanction of revoking the trustee’s approval and pursuing criminal prosecution where applicable.

**Takeaway:** The MPFA maintains the integrity of the MPF system through a robust enforcement framework that allows for various sanctions, including financial penalties, suspension of duties, and the permanent revocation of a trustee’s approval status based on the severity of the misconduct. Therefore, I, II, III & IV is correct.

Correct: Statements I and II are accurate. The Guidelines on Conduct Requirements for Registered Intermediaries are issued by the MPFA under section 6H of the Mandatory Provident Fund Schemes Ordinance (MPFSO) to establish the minimum standards of conduct expected of regulated persons. Furthermore, frontline regulators (the SFC, MA, and IA) utilize these Guidelines to inform their supervisory and investigatory activities regarding the conduct of intermediaries.

**Incorrect:** Statement III is incorrect because the Guidelines do not have the force of law and are not intended to override any legislative provisions or other regulatory codes. Statement IV is incorrect because the Guidelines are explicitly described as non-exhaustive; acts or omissions not specifically mentioned in the text can still be deemed a breach of the performance requirements set out in the MPFSO.

**Takeaway:** While the Guidelines provide a vital framework for compliance and regulatory oversight, they serve as a complementary tool rather than a legally superior or all-encompassing list of rules. I & II only. Therefore, statements I and II are correct.

Correct: Under the Mandatory Provident Fund Schemes Ordinance, casual employees working in the construction or catering industries are exempt from the standard 60-day employment rule. Because these industries are characterized by high labor mobility and daily wage practices, these workers must be enrolled in an MPF scheme (typically an Industry Scheme) regardless of whether their employment period reaches 60 days.

**Incorrect:** The 60-day rule is a general requirement for most regular employees, but it does not apply to casual workers in the two designated industries. Claims that a worker must reach 60 days of service before enrollment or that the rule depends on the number of hours worked per week are inaccurate. Additionally, the type of scheme (such as an Employer Sponsored Scheme) does not grant an exemption from the 60-day rule; rather, the exemption is based on the nature of the industry and the employee’s status as a casual worker.

**Takeaway:** Casual employees in the catering and construction industries are covered by the MPF system from their first day of employment, bypassing the standard 60-day rule that applies to other sectors.

Correct: Statements II, III, and IV accurately reflect the regulatory requirements for MPF intermediaries. According to the Guidelines, if a client cannot be reached for a post-sale call after several attempts, the principal intermediary must send a written confirmation to the client regarding the provision of offering documents and the explanation of key features. Furthermore, all relevant audio records and written documentation must be retained for a minimum of seven years, and frontline regulators must be granted access to these records for supervisory purposes.

**Incorrect:** Statement I is incorrect because the Guidelines explicitly state that the processing of a client’s instruction does not need to wait for the completion of the post-sale call process. The administrative execution of the instruction can proceed while the post-sale call attempts are being made.

**Takeaway:** While post-sale calls are a critical compliance step, they do not act as a ‘stop’ on the processing of client instructions; however, intermediaries must adhere to strict seven-year record-keeping rules and ensure regulatory transparency. Therefore, statements II, III and IV are correct.

Correct: Under the Mandatory Provident Fund (MPF) legislation, voluntary contributions are integrated into the same protective framework as mandatory contributions. This means they are managed by the same approved trustees, qualified investment managers, and custodians. Furthermore, assets derived from voluntary contributions are covered by the same indemnity insurance requirements. However, the legislation allows for flexibility regarding the ‘four pillars’ of benefit handling: vesting, preservation, portability, and withdrawal. These specific aspects are not dictated by the strict statutory rules that apply to mandatory contributions but are instead governed by the specific governing rules of the individual MPF scheme.

**Incorrect:** It is inaccurate to suggest that voluntary contributions are exempt from indemnity insurance or trust arrangements; the law ensures that all scheme assets, regardless of whether they are mandatory or voluntary, receive the same level of professional management and protection. Additionally, the notion that voluntary contributions must follow the same statutory preservation and withdrawal rules as mandatory contributions is incorrect, as the primary characteristic of voluntary contributions is that their portability and withdrawal terms are defined by the scheme’s own rules rather than the MPF Ordinance.

**Takeaway:** While voluntary contributions share the same institutional safeguards and management standards as mandatory contributions, their operational flexibility regarding vesting and withdrawal is determined by the specific governing rules of the chosen MPF scheme.

Correct: According to the MPFA Guidelines on Conduct (specifically III.3), a registered intermediary is required to ensure that any form to be signed by a client is fully completed in all material respects before the client’s signature is requested. Additionally, the principal intermediary must maintain a copy of the signed form for a minimum period of seven years. This ensures that the client is fully aware of the information they are authorizing and provides a robust audit trail for regulatory oversight.

**Incorrect:** It is a violation of conduct standards to ask a client to sign a blank or partially completed form, even if the intermediary intends to fill in the details later for the client’s convenience. Furthermore, any alterations made to a form after completion must be initialed by the client or otherwise authenticated to prove it represents the client’s specific instruction; a signature from the intermediary alone is insufficient. Finally, the mandatory retention period for these records is seven years, making any shorter duration like five years non-compliant with the guidelines.

**Takeaway:** Registered intermediaries must prioritize document integrity by ensuring forms are complete before signing and maintaining those records for at least seven years to comply with MPF regulatory standards.

Correct: In the operational structure of an MPF guaranteed fund, the guarantor is granted the discretionary authority to retain a portion or all of the fund’s investment earnings. These retained funds serve a dual purpose: they can be utilized to offset periods where the fund’s performance falls below the guaranteed level, or they may be realized as profit by the guarantor for providing the guarantee service.

**Incorrect:** It is inaccurate to claim that reserve charges are prohibited; most guaranteed funds actually deduct a guarantee fee or reserve charge from the fund assets to manage the risk of the guarantee. Additionally, the most significant risk to the investor is not liquidity risk but the default risk of the guarantor, which is why regulators require guarantors to maintain sufficient reserves. Furthermore, guarantees are typically structured to apply to the average return over a long-term period rather than being calculated on a monthly or daily basis, allowing the fund time to achieve stable performance.

**Takeaway:** While guaranteed funds provide a level of capital or return security, scheme members should be aware that this comes with specific costs like reserve charges and the potential for the guarantor to retain surplus earnings to manage their financial obligations.

Correct: Statements I, III, and IV are correct. Under the MPF System, substitute workers in the catering and construction industries are typically classified as casual workers, even if they are paid in cash by the person they are covering for. Regarding relevant income, reimbursements for expenses incurred by an employee for employment-related goods and services (such as professional membership fees or mobile phone charges necessary for work) are excluded from the calculation. Conversely, cash allowances (such as those for meals or laundry) where the employee has discretion over the spending are considered relevant income for contribution purposes.

**Incorrect:** Statement II is incorrect because shareholders whose only source of income is dividends, and landlords whose only income is rent (and who are not carrying on a business of renting properties), are considered neither employees nor self-employed persons under the Mandatory Provident Fund Schemes Ordinance. Therefore, they do not fall under the MPF contribution requirements for that specific income.

**Takeaway:** For MPF purposes, it is crucial to distinguish between reimbursements of actual business expenses (not relevant income) and cash allowances (relevant income), and to recognize that passive income like dividends does not trigger MPF obligations as it does not arise from an employment or self-employment relationship. Therefore, statements I, III and IV are correct.

Correct: Statements I, II, and IV are consistent with the MPF Guidelines on Conduct Requirements. Intermediaries are required to provide comprehensive fee disclosures, including the fund expense ratio and ongoing cost illustrations, to ensure clients can make informed comparisons. Any material interest, such as commissions or benefits received from a transaction, must be disclosed to manage potential conflicts of interest. Additionally, principal intermediaries are legally required to maintain records of regulated activities and the rationale for advice for a minimum period of seven years.

**Incorrect:** Statement III is incorrect because registered intermediaries are strictly prohibited from accepting cash payments from clients under any circumstances. All payments must be made by crossed cheques payable directly to the approved trustee or the registered scheme to ensure the proper segregation and protection of client assets.

**Takeaway:** Registered intermediaries must adhere to strict standards regarding fee transparency, conflict disclosure, and record retention, while maintaining a total prohibition on handling client cash to safeguard the integrity of the MPF system. I, II & IV only. Therefore, statements I, II and IV are correct.

Correct: According to the Mandatory Provident Fund Schemes (General) Regulation and the Code on MPF Investment Funds, a Statement of Investment Policy (SIP) must be maintained for each constituent fund and Approved Pooled Investment Fund (APIF). The SIP is a transparency document that must clearly indicate the investment objectives (I), the expected return of the overall portfolio (II), and the policy regarding the acquisition, holding, and disposal of financial futures and option contracts (III). Other required elements include the kinds of securities permitted, the asset allocation balance, the risk of the strategy, and whether securities lending will be conducted.

**Incorrect:** Statement IV is incorrect because the SIP is designed to provide a high-level strategic framework and asset allocation guidelines rather than a list of specific individual security names. While the SIP must specify the “kinds” of securities and the “proportions” between various markets, it does not require the disclosure of a dynamic list of specific stock picks or short-term trading intentions, which are left to the discretion of the investment manager within the policy’s boundaries.

**Takeaway:** The Statement of Investment Policy (SIP) serves as a transparency tool for MPF members, outlining the strategic framework (objectives, risks, returns, and asset types) rather than specific tactical trade lists. I, II & III only. Therefore, statements I, II and III are correct.