Mandatory Provident Fund Quiz 21

Correct: Statements I, III, and IV accurately reflect the regulatory expectations for MPF intermediaries. According to Guidelines VI.2, a subsidiary intermediary is strictly prohibited from using marketing materials that have not been approved by their principal intermediary to ensure all information is fair and balanced. Furthermore, the principal intermediary is legally required to maintain records of client forms for at least seven years to allow for regulatory oversight. The Responsible Officer (RO) also carries the statutory responsibility to use their best endeavors to ensure the firm maintains effective controls and procedures for compliance across all attached subsidiaries.

**Incorrect:** Statement II is incorrect because the Guidelines explicitly state that a registered intermediary must ensure a form is duly completed in all material respects before requesting a client’s signature. Asking a client to sign a blank or incomplete form is a significant breach of conduct, regardless of whether the intermediary intends to complete the details accurately at a later time.

**Takeaway:** Regulatory compliance in the MPF industry emphasizes the integrity of client documentation, the use of vetted marketing materials, and the accountability of the Responsible Officer in maintaining a robust control environment for a minimum retention period of seven years. Therefore, statements I, III and IV are correct.

Correct: According to the MPFA Guidelines on Conduct for Registered Intermediaries (Guidelines VI.2), when a client insists on a fund with a risk level higher than their assessed profile (risk mismatch), the intermediary must explain the mismatch and the risks involved (Statement I), document the client’s reasons and confirm it is the client’s own decision (Statement II), and retain the original signed documentation for at least seven years (Statement III). Additionally, if an audio recording of the mismatch discussion is not available, a post-sale call or confirmation must be implemented to ensure an audit trail (Statement IV).

**Incorrect:** Any combination that excludes one of these steps would be non-compliant with the regulatory requirements. For example, simply documenting the mismatch without obtaining the client’s specific reasons or failing to provide a post-sale verification when recording is absent does not meet the standards set out in paragraphs III.29 and III.30 of the Guidelines.

**Takeaway:** In cases of risk mismatch, registered intermediaries are required to perform enhanced disclosure, documentation, and verification procedures, including a seven-year record retention period and the use of audio recordings or post-sale confirmations. Therefore, all of the above statements are correct.

Correct: Statement I accurately reflects the penalties for a summary conviction regarding the unauthorized conduct of regulated activities, which includes a fine of $100,000 and 6 months of imprisonment. Statement III is correct as the Mandatory Provident Fund Schemes Ordinance (MPFSO) requires that an application for registration as a principal intermediary must be accompanied by applications for the approval of at least one responsible officer. Statement IV correctly identifies that the unauthorized use of protected titles such as “subsidiary intermediary” is an offence carrying a fine of $100,000 and a daily penalty for continuing offences.

**Incorrect:** Statement II is incorrect because the statutory period during which a principal applicant must not have had their qualification as a Type A regulatee revoked on disciplinary grounds is one year immediately before the date of the application, rather than two years.

**Takeaway:** To maintain the integrity of the MPF industry, the MPFSO imposes strict registration requirements for intermediaries, including clean disciplinary records for the preceding year and the mandatory appointment of responsible officers, while enforcing significant criminal penalties for those operating without proper authorization. Therefore, statements I, III and IV are correct.

Correct: Statements I, II, and IV are correct. Under the Mandatory Provident Fund Schemes Ordinance (MPFSO), all mandatory contributions (both employer and employee portions) and any investment returns (income or profits) derived from them must be vested fully and immediately in the scheme member as accrued benefits. Furthermore, while employee voluntary contributions vest immediately, employer voluntary contributions are subject to the specific vesting scales and rules defined in the governing documents of the particular MPF scheme.

**Incorrect:** Statement III is incorrect because the Employee Choice Arrangement (ECA) specifically limits the transferability of mandatory contributions during current employment. While an employee can transfer the accrued benefits derived from their own (employee) mandatory contributions to a personal account of their choice once per calendar year, they are generally not permitted to transfer the employer’s portion of mandatory contributions from the contribution account of their current employment.

**Takeaway:** Mandatory contributions and their investment returns always vest immediately by law, whereas the vesting of employer voluntary contributions is governed by scheme-specific rules; additionally, the ECA portability right applies only to the employee’s portion of mandatory contributions. Therefore, statements I, II and IV are correct.

Correct: Statements I, II, and IV are correct. Under Section 34ZL of the MPFSO, a principal intermediary is legally required to maintain records of activities performed by both itself and its attached subsidiary intermediaries to facilitate regulatory inspection. Furthermore, all intermediaries must ensure they only provide advice on matters where they possess the necessary competence and must disclose all information essential for a client to make an informed material decision. Thus, the correct combination is I, II & IV only.

**Incorrect:** Statement III is incorrect because the statutory conduct requirements, including the obligation to act honestly, fairly, and in the best interests of the client, apply equally to both principal intermediaries and subsidiary intermediaries. A subsidiary intermediary cannot rely solely on internal policy if it contradicts these statutory duties.

**Takeaway:** The conduct requirements for MPF intermediaries emphasize transparency, competence, and accountability, requiring both principal and subsidiary intermediaries to uphold high standards of integrity and record-keeping. Therefore, statements I, II and IV are correct.

Correct: To be registered as a subsidiary intermediary under the Mandatory Provident Fund Schemes Ordinance, an applicant must meet specific criteria: they must be a Type B regulatee (an individual licensed or registered by the SFC, HKMA, or IA), they must be attached to a principal intermediary (the firm), and they must have passed the qualifying examination within the one-year period immediately preceding the date of their application.

**Incorrect:** An applicant for subsidiary intermediary status is not a Type A regulatee, as that designation applies to the principal intermediary (the business entity). Furthermore, the qualifying examination must be passed within one year of the application, so timeframes such as two years or three years are legally insufficient. An individual also cannot register as a subsidiary intermediary without being attached to a principal intermediary.

**Takeaway:** The registration requirements for a subsidiary intermediary include being a Type B regulatee, being attached to a principal intermediary, and passing the qualifying examination within 1 year before the date of the application.

Correct: Under Section 34ZL(1)(c) of the MPFSO, intermediaries are required to advise only on matters for which they are competent. Section 34ZL(2) further stipulates that a principal intermediary must maintain records of regulated activities for both itself and its attached subsidiary intermediaries to allow for regulatory oversight by the frontline regulator. Additionally, Section 34ZL(1)(e) requires that intermediaries disclose sufficient information to clients to enable them to be sufficiently informed for the purpose of making material decisions.

**Incorrect:** Statement III is not a valid interpretation of the conduct requirements. Although Section 34ZL(1)(f) mandates the disclosure of unavoidable conflicts, this does not override the overarching requirement in Section 34ZL(1)(a) for intermediaries to act honestly, fairly, and in the best interests of the client. Prioritizing the intermediary’s interests over the client’s would violate these core principles of integrity and fairness.

**Takeaway:** The statutory conduct framework for MPF intermediaries balances specific duties of care and disclosure with organizational requirements for record-keeping and compliance controls. I, II & IV only. Therefore, statements I, II and IV are correct.

Correct: The Guidelines on Conduct Requirements for Registered Intermediaries are issued by the MPFA to establish the minimum standards of conduct for those engaged in MPF sales and marketing. Crucially, these Guidelines do not have the force of law and cannot override any legislative provisions. They are designed to be complementary to existing laws and the specific codes or guidelines issued by frontline regulators such as the Insurance Authority, the Monetary Authority, and the Securities and Futures Commission.

**Incorrect:** The Guidelines are not an exhaustive list; an intermediary can still be found in breach of performance requirements for actions or omissions even if they are not specifically detailed in the text. It is also incorrect to claim that the Guidelines replace the codes of conduct issued by frontline regulators, as they are meant to function alongside them. Finally, frontline regulators are explicitly expected to be guided by these standards when performing their supervisory and investigatory duties, rather than being restricted from using them.

**Takeaway:** While the Guidelines provide essential guidance on compliance with the Mandatory Provident Fund Schemes Ordinance, they function as a non-legal, complementary framework that works in tandem with other regulatory codes and statutory requirements.

Correct: Statements I, II, and IV accurately reflect the regulatory framework for MPF Exempted ORSO Registered Schemes. Minimum MPF Benefits (MMB) for new members are strictly protected and cannot be forfeited by a trustee even in cases of dismissal for cause. Furthermore, these benefits are subject to portability requirements, meaning they must generally be transferred to an MPF scheme when the member changes employment. The calculation of MMB also incorporates a statutory cap on the final average monthly relevant income, which has been set at $30,000 since June 2014.

**Incorrect:** Statement III is incorrect because there is a specific regulatory carve-out regarding the appointment of trustees. While the MPFA generally requires prior written approval for trustee appointments, this requirement is waived if the appointee is a Registered Trust Company (RTC) in Hong Kong. For an RTC, the employer is only required to notify the MPFA in writing within one month of the appointment rather than seeking advance permission.

**Takeaway:** New members of MPF exempted ORSO registered schemes must have their ‘minimum MPF benefits’ handled with similar preservation and portability standards as standard MPF benefits, and administrative requirements for trustees vary depending on whether the entity is a Registered Trust Company. Therefore, statements I, II and IV are correct.

Correct: Statements I, II, and III accurately reflect the regulatory framework for MPF investments. The primary investment manager must be a Hong Kong-incorporated entity with a minimum of HK$10 million in both paid-up share capital and net assets. To prevent conflicts of interest, any delegate appointed by the investment manager must remain independent of the scheme’s trustee and custodian. Additionally, specific quantitative restrictions are placed on certain asset classes, such as warrants, which are limited to 5% of the total assets of a constituent fund or approved pooled investment fund (APIF).

**Incorrect:** Statement IV is incorrect because the Mandatory Provident Fund Schemes (General) Regulation explicitly prohibits the acquisition of partly paid-up shares for MPF investment purposes. This restriction is in place to protect scheme members from the financial risks associated with future capital calls that the fund would be legally obligated to meet.

**Takeaway:** MPF investment management is governed by strict eligibility criteria for managers, including local incorporation and capital requirements, as well as rigorous asset-level restrictions designed to ensure portfolio diversification and limit exposure to high-risk or contingent liabilities. Therefore, statements I, II and III are correct.

Correct: According to the MPFA Guidelines on Conduct for Registered Intermediaries, when a registered intermediary identifies a client as “vulnerable” (such as those with a low education level or certain impairments) and that client is making a “key decision,” the intermediary must provide extra care. One such measure is offering the client the opportunity to be accompanied by a companion or to have an additional member of staff witness the sales and fund selection process. The intermediary must document that these choices were offered, record the client’s choice, and have the client sign the document to acknowledge it.

**Incorrect:** A post-sale call, if used as an alternative to witnessing, must be conducted by an authorized person other than the subsidiary intermediary who performed the regulated activity, and it must be done within seven working days rather than 48 hours. While transfers out of guaranteed funds are considered key decisions requiring extra care, there is no regulatory requirement for a medical certificate. Furthermore, the mandatory retention period for order instructions and related documentation under these guidelines is seven years, not five years.

**Takeaway:** Registered intermediaries must implement specific “extra care” protocols for vulnerable clients making key decisions, which include offering witnessing options or conducting independent, recorded post-sale calls within a seven-day window.

Correct: Statement I is accurate because regular employees (non-casual) are entitled to a “contribution holiday,” meaning they are not required to make mandatory contributions for the first 30 days of employment and any subsequent incomplete wage period. Statement III is correct because the minimum relevant income level for monthly-paid employees is $7,100; if an employee earns less than this, they are exempt from making mandatory contributions, though the employer must still contribute 5%. Statement IV correctly reflects the Industry Scheme contribution scale, where a daily income of less than $280 requires a $10 flat-rate contribution from the employer and $0 from the casual employee.

**Incorrect:** Statement II is incorrect because casual employees, particularly those in Industry Schemes (common in construction and catering), do not enjoy a contribution holiday. For these employees, mandatory contributions from both the employer and the employee are payable starting from the very first day of employment.

**Takeaway:** It is vital to distinguish between regular and casual employees regarding the contribution holiday; regular employees receive a 30-day grace period for their own contributions, whereas casual employees in Industry Schemes are subject to mandatory contributions immediately upon starting work. Therefore, statements I, III and IV are correct.

Correct: According to the Mandatory Provident Fund Schemes Ordinance (MPFSO) and the Guidelines on Conduct Requirements for Registered Intermediaries, a Responsible Officer (RO) is specifically tasked with ensuring that the principal intermediary (PI) has established and maintains robust internal controls and procedures. These systems must be designed to secure compliance with the statutory conduct requirements set out in Part IVA of the MPFSO, covering both the actions of the PI itself and the conduct of its subsidiary intermediaries (SIs). Additionally, the RO is responsible for the direct supervision of SIs to ensure they adhere to these legal standards.

**Incorrect:** Statement III is incorrect because the regulatory framework focuses on the establishment of “proper controls and procedures” rather than requiring the RO to personally perform every client-facing task. While the RO must ensure a suitability process exists, they are not legally required to personally conduct every face-to-face assessment, which would be operationally impossible in large financial institutions. The responsibility is to oversee the system, not to perform every individual transaction.

**Takeaway:** The core duty of an MPF Responsible Officer involves the high-level establishment, maintenance, and oversight of compliance frameworks that govern the conduct of the firm and its individual registered intermediaries. I, II & IV only. Therefore, statements I, II and IV are correct.

Correct: When a client considers transferring accrued benefits out of a guaranteed fund, the registered intermediary is mandated to warn the client that such a move may lead to the loss of the guarantee if qualifying conditions are not met. This warning must be documented, and the intermediary must obtain a signed confirmation from the client acknowledging they understand these consequences. Additionally, for transfers under the Employee Choice Arrangement (ECA), the intermediary must provide and explain the “Guide to Transfer Benefits under Employee Choice Arrangement” and disclose the time lag during which funds will not be invested. Records of these acknowledgments must be kept for a minimum of seven years.

**Incorrect:** Intermediaries are strictly prohibited from providing predictions, projections, or forecasts regarding the future performance of constituent funds to avoid misleading clients. When comparing fees and charges, the guidelines require that comparisons only be made between similar fund types (e.g., comparing an equity fund to another equity fund) rather than comparing a guaranteed fund to a growth fund. Furthermore, intermediaries must explicitly explain the “out-of-market” period during the transfer process where benefits are cashed out and not invested, rather than claiming the process is instantaneous.

**Takeaway:** To ensure investor protection during MPF transfers, intermediaries must provide mandatory disclosure documents, warn specifically about the loss of guarantees, explain the investment time lag, and ensure all fee comparisons are conducted on a like-for-like basis.

Correct: Statements I, II, and III are correct. Relevant income is broadly defined under the MPF System to include most forms of monetary compensation paid by an employer, such as wages, bonuses, and allowances. For regular (non-casual) employees, the permitted period for enrollment into an MPF scheme is the first 60 days of employment. Additionally, if the deadline of the permitted period falls on a Saturday, 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 meet those conditions.

**Incorrect:** Statement IV is incorrect because the definition of relevant income specifically excludes severance payments and long service payments made under the Employment Ordinance (Cap. 57). These payments are not subject to mandatory MPF contributions.

**Takeaway:** Employers must accurately identify components of relevant income and adhere to the 60-day enrollment window for regular employees, while accounting for statutory exclusions and potential deadline extensions due to holidays or extreme weather. Therefore, statements I, II and III are correct.

Correct: Under the Employee Choice Arrangement (ECA), a relevant employee is granted the right to transfer the accrued benefits derived from their own mandatory contributions made during their current employment. This transfer can be made in a lump sum to an MPF personal account of the employee’s choice, typically once per calendar year, unless the governing rules of the original scheme allow for more frequent transfers. This provides employees with greater autonomy over the investment of their portion of the contributions while they are still employed.

**Incorrect:** The employer’s mandatory contributions attributable to the employee’s current employment are not transferable under the ECA and must remain in the scheme selected by the employer. Regarding accrued benefits from former employment or self-employment that are held in a contribution account, these can be transferred to either a personal account or another contribution account at any time, rather than being restricted to once per calendar year. Furthermore, the ECA does not mandate the transferability of voluntary contributions; such transfers remain subject to the specific governing rules of the individual MPF scheme.

**Takeaway:** The Employee Choice Arrangement (ECA) enhances the portability of MPF benefits by allowing employees to move their own current mandatory contributions to a personal account annually, and their former employment benefits to any personal or contribution account at any time.

Correct: Statements I, II, and IV are correct. Under the Mandatory Provident Fund Schemes (General) Regulation, every MPF scheme must offer at least one MPF Conservative Fund. To protect members’ interests, administrative expenses can only be deducted from this fund if its monthly investment return exceeds the prescribed savings rate (PSR) set by the MPFA. Additionally, the Fee Table is a mandatory disclosure in the scheme’s offering document that must clearly outline the amount of each fee, its purpose, and who is responsible for paying it to ensure full transparency.

**Incorrect:** Statement III is incorrect because administrative expenses that are not deducted in a specific month (due to the fund’s return being equal to or lower than the PSR) are not permanently waived. The regulations allow these uncollected expenses to be carried forward for a period of up to 12 months. They may be recovered in a future month within that period if the fund’s return in that subsequent month is high enough to cover both the current and deferred expenses while still exceeding the PSR.

**Takeaway:** The MPF Conservative Fund features a unique capital preservation mechanism where administrative fees are contingent upon the fund outperforming the prescribed savings rate, supported by strict disclosure requirements in the Fee Table. I, II & IV only. Therefore, statements I, II and IV are correct.

Correct: Statements I, II, and III are accurate according to the Occupational Retirement Schemes Ordinance (ORSO) and MPF Exemption regulations. Statement I correctly identifies the 14-day statutory notification period for winding up a scheme. Statement II accurately reflects that ‘existing members’ (those who joined before the MPF launch) in an MPF-exempted ORSO scheme are not bound by the preservation and portability rules regarding ‘minimum MPF benefits’ (MMB), unlike ‘new members’. Statement III correctly defines a ‘Frozen’ ORSO scheme, where future service is covered by an MPF scheme while existing ORSO assets remain to accrue returns.

**Incorrect:** Statement IV is incorrect because the tax-exempt status of ORSO benefits is contingent upon the benefits being received under ‘prescribed circumstances’ such as retirement, death, incapacity, or termination of service after a certain period. Payouts resulting solely from the employer’s decision to terminate and wind up a scheme do not typically meet these criteria, making the employer-contributed portion taxable.

**Takeaway:** When managing ORSO schemes in the MPF era, employers must distinguish between the rights of existing and new members regarding benefit preservation and ensure strict compliance with notification timelines and tax implications during scheme restructuring or termination. Therefore, statements I, II and III are correct.

In the context of MPF guaranteed funds, the guarantor often holds discretionary power over the investment earnings generated by the fund’s assets. This means they are not required to distribute all returns to the scheme members; instead, they can retain a portion of these earnings. These retained funds serve two primary purposes: they can be taken as a profit for the guarantor as compensation for providing the guarantee, or they can be set aside as a reserve to cover the costs of meeting the guarantee during periods when the fund’s actual investment performance is poor. Other assertions regarding these funds are inaccurate because guarantors are specifically required by regulation to maintain sufficient assets as reserves or provisions to back their financial obligations, making the default risk of the guarantor a more central concern than simple market volatility. Furthermore, the suggestion that all earnings must be credited to members ignores the standard practice of retaining earnings for profit or risk management. Regarding bond funds, it is a fundamental principle that long-term bonds, not short-term ones, are more susceptible to interest rate movements and therefore generally offer higher yields to compensate for that increased risk.

**Takeaway:** Scheme members should understand that guaranteed funds involve a trade-off where the guarantor may retain surplus earnings in exchange for providing capital protection, and the primary risk to consider is the guarantor’s ability to fulfill their financial obligations.

Correct: Statements I, II, and IV accurately describe the components of the World Bank’s five-pillar framework as applied in Hong Kong. The MPF system is the second pillar, which is mandatory, privately-managed, and fully-funded. Pillar Zero represents the non-contributory social safety net (such as CSSA), and Pillar Three encompasses voluntary personal savings and insurance products that individuals use to supplement their retirement income.

**Incorrect:** Statement III is incorrect because the MPF system is a defined contribution system, not a defined benefit system. In a defined contribution scheme, the accumulated benefits are determined by the amount of contributions paid into the account plus any investment returns or losses, rather than a pre-set formula based on salary or years of service.

**Takeaway:** The MPF system serves as the second pillar of Hong Kong’s retirement protection framework, designed to be an employment-based, privately-managed, and defined contribution system that complements other pillars like public assistance and voluntary savings. I, II & IV only. Therefore, statements I, II and IV are correct.

Correct: Bondholders are considered creditors of the issuing organization. Unlike equities, which represent ownership (residual interest), bonds represent a debt obligation. Therefore, if a company goes bankrupt and is liquidated, bondholders have a legal right to be paid from any remaining assets before any distribution is made to stockholders.

**Incorrect:** Stockholders do not have priority over bondholders because equity is a residual claim that only receives value after all liabilities and debt obligations are met. They are not treated as equal creditors because bonds are debt instruments while shares are ownership instruments. Credit ratings reflect the risk of default but do not change the legal hierarchy of claims established by corporate law.

**Takeaway:** A key distinction between debt and equity is that bondholders, as creditors, possess seniority over stockholders regarding the distribution of assets during a corporate liquidation.

Correct: According to the Mandatory Provident Fund Schemes (General) Regulation, while financial derivatives like warrants are permissible, they are subject to strict quantitative limits to safeguard scheme members. Specifically, the total value of warrants held by a constituent fund or an Approved Pooled Investment Fund (APIF) must not exceed 5% of the total assets of that fund. Therefore, allocating 8% of the fund’s value to warrants would exceed this statutory limit and constitute a regulatory breach.

**Incorrect:** Placing funds in bank deposits with authorized financial institutions is a standard permissible investment, provided it follows diversification rules to avoid over-concentration. Investing in fully-paid up shares on approved stock exchanges is the primary method for equity exposure allowed under the regulations. Convertible debt securities are also permitted as long as they meet specific criteria, such as being listed on approved exchanges and meeting credit rating requirements or having underlying shares that are also listed.

**Takeaway:** To ensure prudent management and risk diversification, the MPF legislation imposes specific caps on higher-risk instruments, such as a 5% maximum limit on the investment in warrants for any constituent fund.

Correct: Under the Mandatory Provident Fund Schemes Ordinance, if individuals (natural persons) are appointed as trustees rather than a company, there must be at least two such individuals. These trustees are required to ordinarily reside in Hong Kong and possess a good reputation and character. To protect scheme members against losses arising from a breach of duties, these trustees must provide a performance guarantee, which can be an insurance policy or a bank guarantee. The value of this guarantee must represent 10% of the scheme’s net asset value, subject to a maximum cap of $10 million.

**Incorrect:** Suggestions that only a single individual trustee is sufficient are incorrect, as the law requires a minimum of two. Claims that the performance guarantee is optional based on reputation or residency duration are false, as the guarantee is a mandatory financial safeguard. Furthermore, the statutory calculation for the guarantee is fixed at 10% of the net asset value with a $10 million ceiling; figures such as 15% or 20%, or the absence of a cap, do not align with the regulatory framework.

**Takeaway:** Individual MPF trustees are subject to strict residency and collective responsibility requirements, including a mandatory performance guarantee capped at $10 million to ensure the security of the scheme’s assets.

Correct: According to the MPFA Guidelines, when a client chooses a fund that results in a risk mismatch, a post-sale call must be conducted within seven working days. This call must be audio recorded and performed by an authorized person of the principal intermediary who is not the same subsidiary intermediary who conducted the regulated activity. This separation of duties ensures that the confirmation process is independent and that the client is properly reminded of the risk mismatch and confirms the decision was their own.

**Incorrect:** It is incorrect to suggest that the subsidiary intermediary who performed the sale should conduct the call, as the guidelines specifically require a different authorized person to handle it. Furthermore, the processing of the client’s instruction does not need to wait for the completion of the post-sale call process. If a client cannot be reached by phone after several attempts, the requirement is not simply discharged; instead, the principal intermediary must send a written document to the client to confirm the fund choice and the risk mismatch.

**Takeaway:** The post-sale call for risk-mismatched MPF selections is a mandatory compliance step that must be conducted by an independent authorized person within seven working days and recorded for a minimum of seven years.

Correct: Under the Mandatory Provident Fund regulations, if a cheque for accrued benefits is not presented within its 6-month validity period (the Specified Period), the trustee must then spend an additional 6 months attempting to locate the claimant. Only at the end of this second 6-month period do the funds become “unclaimed benefits.” During this time, the trustee is required to perform specific due diligence, including sending notices to last known addresses, making three contact attempts via other means within a month, and reaching out to the former employer for updated contact details.

**Incorrect:** It is incorrect to classify the benefits as unclaimed immediately after the cheque expires, as the law mandates a further search period. The suggestion of a three-year waiting period is not supported by MPF legislation regarding unpresented cheques. Additionally, receiving a returned cheque does not trigger an automatic three-month countdown to unclaimed status; instead, it requires the trustee to take immediate follow-up actions to locate the member rather than waiting for a fixed period to elapse.

**Takeaway:** For unpresented cheques, the transition to “unclaimed benefits” follows a “6+6” month logic: a 6-month cheque validity period followed by a 6-month search period involving specific contact protocols.

Correct: Under the Mandatory Provident Fund (MPF) regulations, the Fund Fact Sheet (FFS) acts as a periodic report card for each constituent fund and must be issued on a half-yearly basis. In the context of guaranteed funds, a ‘soft guarantee’ is one where the minimum return is promised only if the member meets specific qualifying conditions, such as a minimum investment period or a ‘career average’ requirement.

**Incorrect:** It is inaccurate to suggest that Fund Fact Sheets are issued on a monthly or quarterly basis, as the regulatory requirement is semi-annual. Additionally, a ‘hard guarantee’ is defined by the absence of any qualifying conditions, meaning the return is guaranteed regardless of the member’s specific circumstances, which is the opposite of a ‘career average’ or conditional requirement. Furthermore, guaranteed funds are available in various types of schemes, including Master Trust Schemes, and are not restricted solely to Industry Schemes.

**Takeaway:** The Fund Fact Sheet is a vital semi-annual disclosure document providing key data like the Fund Expense Ratio (FER) and risk indicators, while members must distinguish between hard guarantees (unconditional) and soft guarantees (conditional) when selecting investment options.

Correct: Statement I is accurate as the Mandatory Provident Fund Schemes (General) Regulation stipulates that a registered trust company acting as a custodian must generally maintain a minimum paid-up share capital and net assets of $150 million each, though a lower threshold of $50 million may apply if other specific requirements are met. Statement III is also correct because the 60-day employment rule, which applies to most relevant employees, does not apply to “casual employees” in the catering and construction industries, who must be enrolled regardless of their employment duration.

**Incorrect:** Statement II is incorrect because participation in an Industry Scheme is optional for employers in the catering and construction sectors; they are permitted to enroll their employees in a Master Trust Scheme instead. Statement IV is incorrect because it describes the characteristics of a Master Trust Scheme; an Employer Sponsored Scheme is specifically restricted to the employees of a single employer and its associated companies.

**Takeaway:** While MPF custodians are subject to strict capital requirements to ensure asset safety, the system provides flexibility in scheme types, though special enrollment provisions exist for casual workers in high-mobility industries to ensure continuous coverage. Therefore, statements I and III are correct.