Mandatory Provident Fund Quiz 19

Correct: The Fund Expense Ratio (FER) is designed to provide a comprehensive view of the costs associated with an MPF fund. When a constituent fund invests in one or more Approved Pooled Investment Funds (APIFs), the regulatory framework requires that the FER calculation includes all fees and charges incurred at the APIF level. This ensures that the ratio accurately reflects the total impact of expenses on the fund’s performance, regardless of the underlying investment structure.

**Incorrect:** Excluding fees at the APIF level would provide an incomplete and potentially misleading picture of the fund’s cost structure to the scheme member. While the FER is a critical disclosure, it is not required for funds that have been in operation for less than two years, as a shorter history may not provide a representative average of ongoing expenses. Furthermore, the FER is disclosed in the Fund Fact Sheet and the Offering Document (OCI) rather than the Annual Benefit Statement, which is a personalized record of a member’s specific account transactions and balances.

**Takeaway:** For transparency in fee disclosure, the FER must account for all layers of management and operational costs, including those from underlying APIFs, but it is only mandatory for funds with a minimum of two years of operating history.

Correct: The Mandatory Provident Fund (MPF) system is defined as the second pillar within the World Bank’s five-pillar framework. Its core characteristics include being mandatory for the relevant working population, employment-based, and privately managed by approved trustees. It is a defined contribution system, meaning the ultimate benefits are determined by the total contributions made and the investment performance of the chosen funds, rather than a guaranteed payout formula.

**Incorrect:** The first pillar is characterized as a mandatory, contributory, and publicly-managed system, which differs from the privately-managed nature of the MPF. The fourth pillar refers to informal support, such as family assistance, or other social programs like healthcare and housing. Describing the MPF as a defined benefit system is inaccurate because, in a defined contribution system like the MPF, the investment risk is borne by the member and the final amount is not fixed or guaranteed by the employer or the government.

**Takeaway:** In Hong Kong’s retirement protection landscape, the MPF functions as the second pillar of the World Bank framework, emphasizing a mandatory, privately-managed, and fully-funded contribution model for the workforce.

Correct: Statements I, III, and IV accurately reflect the regulatory requirements for determining contribution days under the Mandatory Provident Fund Schemes Ordinance. For both employers of regular employees and self-employed persons (SEPs), if the statutory contribution day falls on a Saturday, a public holiday, or a day with a gale or black rainstorm warning, the deadline is extended to the next following day that is not one of those days. Furthermore, for an SEP who elects to contribute on a monthly basis, the contribution day is the last day of that contribution period.

**Incorrect:** Statement II is incorrect because the 60-day permitted period for enrolling a new employee is a fixed statutory limit. Unlike the contribution day, the permitted period ends exactly on the 60th day of employment, regardless of whether that day is a Saturday, Sunday, public holiday, or a day with extreme weather warnings.

**Takeaway:** It is vital to distinguish between the ‘contribution day,’ which allows for extensions due to holidays or extreme weather, and the ‘permitted period’ for enrollment, which is a strict 60-day calendar limit that does not shift. Therefore, statements I, III and IV are correct.

Correct: Statements I, II, and III are accurate descriptions of MPF disclosure and fund mechanics. The Fund Fact Sheet (FFS) is a regulatory requirement issued every six months (half-yearly) to provide transparency on a fund’s performance, risk, and portfolio. A “soft guarantee” is conditional, meaning the member must meet specific criteria (like a minimum investment period) to benefit from the guarantee. The Fund Expense Ratio (FER) is a critical metric included in the FFS that reflects the total operating expenses of the fund, allowing for cost comparisons across different schemes.

**Incorrect:** Statement IV is incorrect because a “hard guarantee” is characterized by the absence of qualifying conditions; the guarantor provides the minimum return regardless of the member’s specific circumstances. The concept of a “career average” or minimum holding period is specifically associated with “soft guarantees,” where the benefit is contingent upon meeting those defined requirements.

**Takeaway:** Investors should utilize the Fund Fact Sheet to assess the cost-efficiency (via the FER) and risk profile of their investments. When selecting guaranteed funds, it is vital to distinguish between hard guarantees (unconditional) and soft guarantees (conditional) to ensure the investment aligns with their expected participation period. Therefore, statements I, II and III are correct.

Correct: According to the MPF Guidelines, a ‘key decision’ for a vulnerable client (such as an individual with a low level of education) includes choosing a constituent fund, making a transfer that involves moving out of a guaranteed fund, making an early withdrawal of accrued benefits, or deciding the amount of voluntary contributions. In this scenario, moving a balance from a guaranteed fund to an equity fund constitutes a key decision because it involves both fund selection and the potential forfeiture of a guarantee, thereby triggering the requirement for ‘extra care’ such as a witness or a post-sale call.

**Incorrect:** General administrative or informational requests do not fall under the regulatory definition of a ‘key decision.’ Updating beneficiary information is considered an administrative record change rather than a transaction-based investment decision. Similarly, requesting annual reports or seeking general information about tax-deductibility limits are considered service-related inquiries that do not require the specific ‘extra care’ protocols mandated for high-impact financial decisions.

**Takeaway:** Registered intermediaries must identify specific ‘key decisions’—including fund selection, transfers from guaranteed funds, early withdrawals, and voluntary contribution amounts—to ensure that vulnerable clients receive the necessary additional support and regulatory protections.

Correct: Statement I is correct as the statutory requirement for terminal illness withdrawal specifies a life expectancy of 12 months or less, certified by a registered medical practitioner or registered Chinese medicine practitioner. Statement II is also correct because the “small balance” ground (for balances not exceeding $5,000) requires a statutory declaration that the member has no accrued benefits in any other MPF schemes and has not made contributions for at least 12 months.

**Incorrect:** Statement III is incorrect because the law mandates that no fees or financial penalties (other than necessary transaction costs) may be charged for the first four installment withdrawals in any given year for members who have reached age 65 or opted for early retirement. Statement IV is incorrect because the MPF regulations explicitly recognize medical certificates issued by both registered medical practitioners and registered Chinese medicine practitioners for claims related to total incapacity.

**Takeaway:** MPF intermediaries must ensure clients understand that while early withdrawal is possible under specific grounds like terminal illness or small balances, these are subject to strict evidentiary requirements, such as specific medical certifications or declarations regarding other accounts. Therefore, statements I and II are correct.

Correct: Under the Mandatory Provident Fund Schemes Ordinance (MPFSO), providing false or misleading records or information with a specific intent to defraud during an MPFA investigation is a serious criminal offense. Upon conviction on indictment, the maximum penalty is a fine of $1,000,000 and imprisonment for 7 years. This high level of punishment is designed to deter fraudulent interference with regulatory oversight.

**Incorrect:** A fine of $200,000 and imprisonment for 1 year is the maximum penalty for failing to comply with an investigation requirement without the intent to defraud. A fine of $1,000,000 and imprisonment for 2 years applies when a person provides false or misleading information knowingly or recklessly, but where a specific intent to defraud is not proven. A pecuniary penalty of $10,000,000 refers to the maximum administrative fine the MPFA can impose as a disciplinary order, which is distinct from criminal penalties imposed by a court upon conviction on indictment.

**Takeaway:** The MPF regulatory framework distinguishes between simple non-compliance, reckless misinformation, and intentional fraud, with the latter carrying the most severe criminal sanction of up to 7 years of imprisonment.

The definition of ‘relevant income’ for MPF purposes includes any wages, salary, leave pay, fee, commission, bonus, gratuity, perquisite, or allowance expressed in monetary terms. Tips and service charges that are collected by the employer (for example, through credit card payments or service charges added to the bill) and subsequently distributed to the employees are considered monetary payments arising from employment and must be included in the calculation of relevant income. Statutory severance payments and long service payments are specifically excluded from the definition of relevant income by law. Similarly, a payment in lieu of notice is not considered relevant income because it does not fall within the specific categories of earnings defined in the Mandatory Provident Fund Schemes Ordinance. Non-monetary benefits, such as meal vouchers or the provision of free meals, are also excluded as they are not cash payments made directly to the employee for their benefit. To correctly identify relevant income, one must distinguish between monetary payments provided by the employer (which are generally included) and non-monetary benefits or specific statutory compensation like severance pay and payments in lieu of notice (which are excluded).

Correct: Under the World Bank’s multi-pillar framework, the MPF system is categorized as Pillar Two. This specific pillar is defined as a mandatory, privately-managed, and fully-funded contribution system that is usually employment-based. In Hong Kong, the MPF requires both employers and employees to contribute to privately managed schemes, fulfilling these criteria to provide basic retirement protection for the workforce.

**Incorrect:** Pillar Zero is incorrect because it refers to non-contributory, publicly-funded safety nets like the Comprehensive Social Security Assistance (CSSA) or Old Age Allowance. Pillar One is incorrect because it describes a publicly managed, often “pay-as-you-go” mandatory contributory system, which is not how the MPF is structured. Pillar Three is incorrect because it encompasses voluntary savings, such as voluntary MPF contributions or personal life insurance, rather than the mandatory portion of the system.

**Takeaway:** The MPF system serves as the second pillar of the World Bank’s retirement protection framework, focusing on mandatory, privately-managed, and fully-funded contributions to ensure income security for the working population.

Correct: Offering a cash rebate or any monetary/non-monetary benefit, such as a gift voucher, to induce a client to transfer their accrued benefits is a violation of the MPFA Guidelines. These regulations are designed to ensure that clients choose MPF schemes based on factors like fund performance, fees, and service quality, rather than being swayed by short-term external incentives that do not contribute to their long-term retirement savings.

**Incorrect:** Providing a discount on the intermediary’s own professional fees is a recognized exception to the rule against incentives. Similarly, offering bonus units or fee rebates that are credited directly back into the client’s MPF account is permitted because these benefits remain within the MPF system and directly enhance the client’s accrued benefits. Non-monetary benefits provided through a membership privilege program that has been approved by the scheme’s trustee or sponsor are also allowed.

**Takeaway:** While intermediaries are prohibited from offering external gifts or cash inducements to influence MPF decisions, they are permitted to offer incentives that are integrated into the scheme’s fee structure or are part of an approved trustee membership program.

Correct: Statements II and III are correct. According to the MPFA Guidelines, when a risk mismatch is identified, the post-sale call must serve as a safeguard to ensure the client is aware of the discrepancy between their risk profile and the chosen fund, and to confirm the decision was made independently by the client. Furthermore, to ensure regulatory compliance and facilitate future audits, all related audio recordings or alternative written documentation must be retained for a period of no less than seven years.

**Incorrect:** Statement I is incorrect because the guidelines explicitly require that the post-sale call be conducted by an authorized person of the principal intermediary who was not the subsidiary intermediary involved in the original regulated activity, ensuring an independent verification. Statement IV is incorrect because the processing of the client’s fund selection instructions does not need to be suspended or delayed pending the completion of the post-sale call process.

**Takeaway:** Registered intermediaries must maintain independent post-sale monitoring through recorded calls or written confirmations for risk-mismatch cases, ensuring these records are preserved for seven years to meet MPFA conduct standards. Therefore, statements II and III are correct.

Correct: Under the Mandatory Provident Fund Schemes Ordinance (MPFSO), if an individual carries on regulated activities as an employee, agent, or representative of another person without the required registration, and is convicted on indictment, they are subject to a maximum fine of $1,000,000 and imprisonment for 2 years. Furthermore, if the offence is a continuing one, an additional fine of $20,000 may be imposed for each day the contravention continues.

**Incorrect:** The penalty involving a $100,000 fine and 6 months of imprisonment, with a $2,000 daily fine, is the maximum threshold for a summary conviction, which is a less severe level of prosecution than an indictment. The penalty of a $100,000 fine and a $2,000 daily fine without any term of imprisonment is specifically reserved for the offence of using protected titles (such as principal or subsidiary intermediary) without a reasonable excuse. Other variations of fines and prison terms do not reflect the statutory limits defined for this specific contravention under the MPFSO.

**Takeaway:** Carrying on regulated MPF activities without registration while acting as an employee or representative is a serious offence; the law distinguishes between summary convictions and convictions on indictment, with the latter carrying significantly higher financial and custodial penalties.

Correct: According to the Mandatory Provident Fund Schemes (General) Regulation, a Statement of Investment Policy (SIP) must be prepared for each constituent fund and Approved Pooled Investment Fund (APIF) to ensure transparency. The required disclosures include the investment objectives, the kinds of assets, the asset balance, the risk and expected return of the overall portfolio, the policy on financial futures and options, and whether the fund will engage in securities lending. Therefore, statements I, II, and IV are mandatory requirements.

**Incorrect:** Statement III is incorrect because the legislation requires the SIP to indicate the ‘kinds’ of securities and the ‘balance’ (proportion) between various assets and markets, rather than a real-time list of the specific names of every individual security held. Such a requirement would be impractical for a policy document intended to provide a broad framework for the fund’s investment strategy.

**Takeaway:** The Statement of Investment Policy (SIP) serves as a critical transparency document for MPF members, outlining the fundamental strategy, risk-return profile, and operational constraints (such as derivatives use and securities lending) of a fund. The correct combination is I, II & IV only. Therefore, statements I, II and IV are correct.

Correct: Statements I, II, and III are accurate. New members of MPF exempted ORSO registered schemes are subject to preservation, portability, and withdrawal rules regarding their “minimum MPF benefits” (MMB). This means they generally cannot access these funds until age 65 or under specific statutory grounds such as permanent departure from Hong Kong. The MMB is calculated as the lesser of the accrued benefits or a formula based on 1.2 times the final average monthly relevant income (capped at $30,000) multiplied by years of post-MPF service. Additionally, if an employer reduces future benefits or rights under the scheme, they must provide affected members with a fresh option to choose between the ORSO scheme and an MPF scheme.

**Incorrect:** Statement IV is incorrect because the Exemption Regulation explicitly states that a trustee cannot forfeit a member’s “minimum MPF benefits” upon dismissal for cause. While other benefits in an ORSO scheme might be subject to forfeiture depending on the governing rules, the MMB portion is protected to ensure a basic level of retirement provision similar to the MPF system.

**Takeaway:** New members of MPF exempted ORSO registered schemes are entitled to specific protections for their minimum MPF benefits, including non-forfeitability for cause and the right to a new option if scheme benefits are reduced. I, II & III only. Therefore, statements I, II and III are correct.

Correct: Statements I, III, and IV are correct. Under the Mandatory Provident Fund Schemes Ordinance (MPFSO), if a subsidiary intermediary fails to complete specified training, the MPFA may issue a written notice requiring completion within at least 30 days. If the individual fails to comply with this notice, the MPFA has the authority to suspend their registration. Furthermore, if the non-compliance continues for 30 days after the suspension begins, the MPFA may then revoke the individual’s registration.

**Incorrect:** Statement II is incorrect because the MPFA is the sole authority empowered to impose disciplinary sanctions on registered intermediaries for failing to comply with performance requirements. While Frontline Regulators (FRs) have the power to supervise and investigate suspected non-compliance, they do not have the legal authority to impose sanctions such as fines, suspensions, or revocations themselves.

**Takeaway:** The regulatory framework distinguishes between the investigative role of Frontline Regulators and the disciplinary role of the MPFA. For training non-compliance, the MPFA follows a progressive enforcement path: written notice, followed by potential suspension, and ultimately revocation if the requirement remains unfulfilled. Therefore, statements I, III and IV are correct.

Correct: According to the MPFA Guidelines on Conduct for Registered Intermediaries, when a comparison of investment performance is made, the intermediary should compare a constituent fund’s performance with others of the same type (a “like with like” comparison) over a long-term period, which is defined as at least five years where practicable. Furthermore, the comparison should focus on net performance rather than gross performance to provide a realistic view of the returns after fees and charges have been deducted.

**Incorrect:** It is improper to encourage a client to make a selection based primarily on past performance, as the guidelines explicitly state that past performance is not necessarily a reliable indicator of future results. Verbal disclosures regarding compensation or benefits must always be followed up with a written or electronic document as soon as reasonably practicable, and these records must be retained for at least seven years. Using gross performance figures is discouraged because it fails to reflect the actual impact of fees on the member’s accrued benefits.

**Takeaway:** Registered intermediaries must ensure that any investment performance information provided to clients is balanced, focuses on long-term net returns, and compares similar fund types to avoid misleading the client during the decision-making process.

Correct: A “Frozen” ORSO scheme is defined by the cessation of all future contributions regarding future service. Under this arrangement, the benefits already accrued by existing members remain within the ORSO scheme to continue earning investment returns until the members are eligible for payout according to the governing rules. Because no new contributions are being made to the ORSO scheme, the employer is required to enroll all relevant employees into an MPF scheme to meet mandatory contribution requirements.

**Incorrect:** A “Top-up” ORSO scheme involves all employees being covered by an MPF scheme while the ORSO scheme is modified to provide supplementary benefits over and above the MPF minimums. An “MPF Exempted ORSO Scheme with Closed Membership” allows existing members to continue accruing new benefits under the ORSO scheme, though new employees are excluded. An “MPF Exempted ORSO Scheme with Open Membership” allows both existing and new eligible employees the choice to join the ORSO scheme instead of the MPF scheme.

**Takeaway:** The primary distinction of a “Frozen” ORSO scheme is that while the scheme remains technically active to manage and grow existing assets, it no longer accepts any contributions for ongoing employment service, necessitating full MPF participation for the workforce.

Correct: According to the Mandatory Provident Fund Schemes Ordinance (MPFSO), a ‘material decision’ encompasses specific actions related to the management of MPF accounts. This includes deciding the timing of transferring accrued benefits between constituent funds (as seen in statement I), determining the specific amount of voluntary contributions to be paid into a scheme (as seen in statement II), and deciding whether to move benefits from an occupational retirement scheme (ORSO) into the MPF system (as seen in statement III). These actions are central to the statutory definition because they directly affect the member’s financial position within the MPF framework.

**Incorrect:** Selecting a legal advisor to review employment contracts is a general business management or legal compliance activity. While it relates to the employer-employee relationship, it does not involve a decision regarding the application to join, contribute to, or transfer funds within an MPF scheme. Therefore, it does not fall under the statutory definition of a material decision as defined in the regulatory framework for MPF intermediaries.

**Takeaway:** A material decision is strictly limited to choices involving scheme membership, contribution amounts, and the transfer of benefits between funds or schemes. I, II, and III only.

Correct: Statements I, II, and IV represent “material decisions” as defined under the Mandatory Provident Fund Schemes Ordinance (MPFSO). A material decision includes a member’s or employer’s choice regarding whether to transfer accrued benefits between constituent funds (v), the specific amount of voluntary contributions to be paid into a fund (iv), and whether to transfer benefits from an occupational retirement (ORSO) scheme into an MPF scheme (vii).

**Incorrect:** Statement III is incorrect because the tactical asset allocation and the selection of underlying securities within a constituent fund’s portfolio are responsibilities of the investment manager or trustee. These are operational investment management decisions, not “material decisions” made by a scheme member or employer that an MPF intermediary would induce or advise upon under the statutory regulatory framework.

**Takeaway:** Under the MPFSO, regulated activities involve inducing or advising on material decisions, which are specifically defined as choices made by clients regarding scheme membership, contribution levels, fund selection, and the transfer of benefits. I, II & IV only. Therefore, statements I, II and IV are correct.

Correct: For a corporate entity to be approved as an MPF trustee, it must satisfy rigorous financial and governance standards. This includes maintaining both paid-up share capital and net assets of at least HK$150 million. Additionally, the governance structure must ensure that the chief executive officer and a majority of the directors (including at least one independent director) possess the requisite skills, knowledge, and expertise to manage provident fund schemes effectively.

**Incorrect:** While professional indemnity insurance is a mandatory duty for an approved trustee, it is not the primary metric for capital adequacy during the approval phase, which specifically requires $150 million in capital and net assets. Proposals suggesting lower capital thresholds, such as $50 million or $100 million, fail to meet the statutory minimums. Furthermore, while the board must include an independent director and a majority with expertise, there is no requirement for the entire board to be independent or for all directors to be Hong Kong residents, provided the trustee maintains sufficient presence and control in the territory.

**Takeaway:** The MPF regulatory framework ensures scheme security by requiring corporate trustees to have substantial financial backing (HK$150 million) and a leadership team characterized by both professional expertise and independent oversight.

Correct: Statement I is correct because according to MPF regulations, if a self-employed person (SEP) fails to produce evidence of relevant income and the trustee is not satisfied with the reason provided, the relevant income is automatically deemed to be the maximum level, which is currently $360,000 per year. Statement III is correct as the statutory permitted period for an SEP to enroll in an MPF scheme is 60 days from the date they become self-employed.

**Incorrect:** Statement II is incorrect because an SEP who suffers a net loss in their business is permitted to lodge a statement with the trustee to discontinue mandatory contributions until their income exceeds the minimum level ($85,200 per year). Statement IV is incorrect because if the most recent Notice of Assessment was issued more than 2 years ago, the SEP must declare an amount equal to the previous year’s assessable profits rather than relying on the outdated assessment.

**Takeaway:** Self-employed persons must adhere to specific income reporting rules and a 60-day enrollment window, with the option to suspend contributions during loss-making periods. I & III only. Therefore, statements I and III are correct.

Correct: Statement I is correct because chauffeurs, bodyguards, and boatboys employed by an individual are specifically included in the MPF System as their services are not rendered within a residential premise. Statement III is correct because drivers of taxis, public light buses, and vans who are not owners of the vehicles are generally classified as self-employed persons (or employees) and are required to be covered by the MPF System.

**Incorrect:** Statement II is incorrect because domestic servants, baby sitters, and gardeners who render their services at the employer’s household (residential premises) are specifically exempt from the MPF System. Statement IV is incorrect because employees entering Hong Kong under an employment visa with permission to stay for a period not exceeding 13 months are exempt from the MPF requirements for that initial period.

**Takeaway:** MPF coverage depends on the nature of the service and the location of the work for domestic staff, while overseas employees benefit from a 13-month exemption period if their initial permitted stay does not exceed that duration. I & III only. Therefore, statements I and III are correct.

Correct: Statements I and II accurately describe the provisions of Section 107 of the Securities and Futures Ordinance (SFO), which criminalizes the act of inducing others to join MPF schemes or invest in pooled funds through fraudulent or reckless misrepresentations, punishable by a HK$1,000,000 fine and 7 years’ imprisonment. Statement III is correct as the MPFA uses an online public register for verification rather than physical cards. Statement IV correctly identifies the requirement for a subsidiary intermediary to be attached to a principal intermediary for registration purposes.

**Incorrect:** All statements provided are accurate. Common misconceptions in this area include the belief that only intentional fraud (and not recklessness) is covered under Section 107, or that the MPFA issues physical licenses similar to a driving license, whereas they actually maintain a digital public register.

**Takeaway:** MPF intermediaries must operate under strict conduct guidelines; Section 107 of the SFO serves as a significant legal deterrent against misrepresentation, while the MPFA ensures transparency through its online registration database. Therefore, all of the above statements are correct.

Correct: According to Section 34T(2) of the Mandatory Provident Fund Schemes Ordinance (MPFSO), if a business entity (Type A regulatee) applies to become a principal intermediary and intends to appoint an individual who is not yet registered as a subsidiary intermediary to serve as its responsible officer, the application must be accompanied by three specific submissions: the individual’s application for registration as a subsidiary intermediary, an application for the approval of that individual’s attachment to the principal intermediary, and an application for the approval of that individual as a responsible officer.

**Incorrect:** Providing only the registration and attachment applications is insufficient because the regulatory framework requires the formal approval of a responsible officer to be established concurrently with the principal intermediary’s registration. A declaration of fitness and properness, while part of the background check, does not fulfill the statutory requirement for the specific applications for attachment and responsible officer status. Furthermore, registration as a subsidiary intermediary is a distinct legal process and is not automatically granted simply by applying for a responsible officer role.

**Takeaway:** To ensure proper oversight from the commencement of regulated activities, the MPFSO requires that a new principal intermediary application must simultaneously include the registration, attachment, and responsible officer approval applications for its designated supervisory personnel.

Correct: The Mandatory Provident Fund Schemes Authority (MPFA) is granted extensive powers to ensure that approved trustees adhere to their statutory duties. These powers include the ability to order remedial actions to fix specific issues, suspend a trustee from administration while appointing a temporary replacement to maintain scheme continuity, and impose financial penalties that are scaled according to the severity of the breach.

**Incorrect:** None of the statements provided are inaccurate. Under the MPF legislation, certain non-compliances are classified as criminal offences. If an approved trustee is convicted of such an offence, they are subject to statutory maximum penalties, which include a fine of up to $200,000 and a prison sentence of up to 2 years. These measures are designed to ensure high standards of conduct and accountability within the MPF system.

**Takeaway:** The regulatory framework provides the MPFA with a tiered enforcement strategy involving administrative sanctions, financial penalties, and criminal prosecution to address trustee misconduct. I, II, III & IV. Therefore, I, II, III & IV is correct.

Correct: Under the Mandatory Provident Fund (MPF) System, a casual employee is defined as someone employed in the catering or construction industries on a day-to-day basis or for a fixed period of less than 60 days. Since a licensed food factory is explicitly categorized as a catering establishment under the relevant regulations, an individual hired there for a 45-day period meets the criteria for a casual employee. These individuals are covered by the MPF System regardless of the short duration of their employment, provided they meet the age requirements.

**Incorrect:** The other scenarios do not qualify for casual employee status for specific reasons. An individual under the age of 18 is classified as an exempt person, regardless of the industry or duration of their work. A security guard employed by a property management company does not fall under the designated catering or construction industries; therefore, they would only be covered as a regular employee if their employment lasted 60 days or more. Finally, while a cooked food stall is a catering establishment, a person who is a self-employed licensed hawker is specifically listed as an exempt person under the MPF Ordinance.

**Takeaway:** Casual employee status and the associated Industry Schemes are strictly limited to the catering and construction sectors for short-term or daily workers. Even within these industries, standard exemptions such as those based on age or specific statutory roles (like licensed hawkers) still apply.

Correct: Statements I, II, and IV are correct. According to the MPF legislation and the Code on MPF Investment Funds, a Statement of Investment Policy (SIP) must be maintained for both constituent funds and Approved Pooled Investment Funds (APIFs). The SIP is required to disclose specific operational details, including the policy regarding securities lending (Statement I). Furthermore, if an APIF is structured as an insurance policy, it must be a Class G policy issued by an authorized insurer (Statement II). All APIFs, regardless of whether they are unit trusts or insurance policies, must be authorized by the SFC as collective investment schemes under the Securities and Futures Ordinance (Statement IV).

**Incorrect:** Statement III is incorrect because the requirement to prepare and maintain a Statement of Investment Policy is mandatory for both constituent funds and APIFs. The legislation aims to ensure a high degree of transparency so that members are well-informed about the investment strategy and risks at both the scheme level and the underlying investment level.

**Takeaway:** To ensure transparency and investor protection, MPF regulations mandate that every constituent fund and APIF must have a Statement of Investment Policy covering objectives, asset allocation, risk/return profiles, and specific practices like securities lending or the use of financial derivatives. Therefore, statements I, II and IV are correct.