Mandatory Provident Fund Quiz 24

Correct: Statements I, II, and III are explicitly defined as “material decisions” under the Mandatory Provident Fund Schemes Ordinance (MPFSO). These include decisions regarding the transfer of accrued benefits between constituent funds within a scheme, the specific amount of voluntary contributions a member chooses to pay, and the decision to transfer benefits from an Occupational Retirement (ORSO) scheme into the MPF system.

**Incorrect:** Statement IV is incorrect because the statutory definition of a “material decision” focuses on the choices made by the scheme member or employer regarding their participation, fund selection, and contribution levels. It does not extend to the underlying investment management decisions, such as the selection of individual securities by a fund manager, which is a function of the investment manager rather than a material decision made by the person being advised.

**Takeaway:** Under the MPF statutory regulatory framework, a material decision involves key administrative and investment choices made by members or employers, such as joining a scheme, setting contribution amounts, or transferring benefits. The correct combination is I, II & III only. Therefore, statements I, II and III are correct.

Correct: Statement I is accurate because bonds represent a debt obligation where the holder acts as a creditor to the issuer, whereas equities represent a fractional ownership in the company. Statement III is also correct as it describes the fundamental inverse relationship between market interest rates and bond prices; when interest rates fall, existing bonds with higher fixed coupon rates become more valuable, driving their market price upward.

**Incorrect:** Statement II is incorrect because, in the event of a company’s liquidation or bankruptcy, bondholders (as creditors) have a prior claim on the company’s assets and must be paid before any remaining funds are distributed to stockholders. Statement IV is incorrect because zero-coupon bonds, by definition, do not make periodic interest payments; instead, they are issued at a discount to their par value and provide a return through capital appreciation upon maturity.

**Takeaway:** Investors must distinguish between the creditor status of bondholders, which offers higher security during insolvency and price sensitivity to interest rate changes, and the ownership status of stockholders, which carries higher risk but potential for dividends and capital growth. I and III only.

Correct: Under the Mandatory Provident Fund Schemes Ordinance, relevant income encompasses all monetary payments including wages, salaries, bonuses, and commissions. Service charges collected by an employer and subsequently distributed to staff are considered a form of gratuity or commission and must be included in the calculation. Furthermore, while non-monetary benefits are excluded, a cash payment made by an employer to cover an employee’s personal liabilities, such as the registration and license fees for a car owned by the employee, is treated as a monetary benefit and thus constitutes relevant income. Therefore, the items that qualify are I and II only.

**Incorrect:** Statutory long service payments and severance payments are specifically listed as exclusions from the definition of relevant income to ensure that these terminal benefits are not reduced by MPF contributions. Meal vouchers are classified as non-monetary benefits because they are not direct cash payments that the employee can spend freely, and thus they are excluded from the relevant income calculation. Similarly, payments in lieu of notice are also excluded as they do not fall under the specific heads of income defined in the regulations.

**Takeaway:** Relevant income generally includes all monetary remuneration arising from employment, but it specifically excludes statutory termination payments (severance and long service pay) and non-monetary benefits like vouchers or the free use of company-owned assets. I and II only.

Correct: Statements I, II, III, and IV are all accurate according to the Mandatory Provident Fund Schemes Ordinance and the MPFA’s regulatory framework. Specifically, the law requires that if individual trustees are appointed, there must be at least two of them to ensure mutual oversight. These individuals must satisfy residency requirements (ordinarily resident in Hong Kong) and character requirements. To protect scheme assets, they must provide a performance guarantee (insurance or bank guarantee) equal to 10% of the scheme’s net asset value, capped at HK$10 million. Furthermore, the MPFA’s ongoing monitoring includes receiving “whistle blowing” reports from auditors to ensure compliance.

**Incorrect:** There are no incorrect statements provided. Common distractors in this topic often involve misstating the number of required trustees (e.g., claiming one is sufficient), miscalculating the performance guarantee percentage or cap (e.g., 5% or no cap), or suggesting that residency in Hong Kong is not a mandatory requirement for individual trustees.

**Takeaway:** Individual trustees are subject to specific statutory requirements regarding their number, residency, and financial guarantees, and they are monitored by the MPFA through both internal controls and external reports from service providers like auditors. Therefore, all of the above statements are correct.

Correct: Statements I, II, and IV accurately reflect the MPF regulatory framework regarding coverage and relevant income. Substitute workers in the catering industry are typically classified as casual workers and are covered by the MPF System, even if their tenure is brief. Furthermore, reimbursements for specific employment-related expenses, such as mobile phone service charges, are excluded from the definition of relevant income as they are not considered part of the employee’s remuneration. Cash allowances, including those provided for various types of leave (e.g., marriage or compassionate leave), are considered relevant income for the purpose of calculating MPF contributions.

**Incorrect:** Statement III is incorrect because a shareholder whose only source of income is dividends is considered neither an employee nor a self-employed person under the Mandatory Provident Fund Schemes Ordinance. Dividends represent a return on investment rather than income derived from a contract of service or the carrying on of a business as a sole proprietor or partner.

**Takeaway:** For MPF compliance, it is crucial to distinguish between reimbursements for business-related expenses (which are not relevant income) and cash allowances (which are relevant income), and to correctly identify the employment status of specific roles like substitute workers and shareholders. Therefore, statements I, II and IV are correct.

Correct: Statements I, II, and III accurately reflect the statutory requirements under the Mandatory Provident Fund Schemes Ordinance (MPFSO). Employees of the European Union Office of the European Commission in Hong Kong are specifically classified as exempt persons. Self-employed individuals must enrol in an MPF scheme within the 60-day permitted period regardless of their income level, although the obligation to make contributions only triggers if they meet the minimum income threshold. Furthermore, for non-casual employees, the employer’s contribution obligation begins on the first day of employment, while the employee is granted a 30-day contribution holiday.

**Incorrect:** Statement IV is incorrect because the exemption granted to members of MPF-exempted ORSO schemes is specific to that particular employment. According to the MPFSO, if such an individual earns income from other employment or self-employment that is not covered by the exempted ORSO scheme, they are not automatically exempt from MPF requirements regarding that additional income.

**Takeaway:** It is crucial to distinguish between the duty to enrol (which often applies regardless of income) and the duty to contribute. Additionally, MPF exemptions are typically tied to specific roles or schemes and do not provide a blanket exemption for an individual’s other sources of relevant income. Therefore, statements I, II and III are correct.

Correct: The Mandatory Provident Fund Schemes Authority (MPFA) possesses a comprehensive range of supervisory and enforcement powers to ensure approved trustees comply with their statutory obligations. These powers include the ability to direct a trustee to take remedial action, conduct formal investigations, and impose financial penalties that are proportionate to the severity of the breach. Furthermore, the MPFA can suspend a trustee and appoint a temporary replacement to ensure the continued administration of the scheme.

**Incorrect:** All the provided statements are accurate descriptions of the MPFA’s authority. In cases of serious non-compliance, the MPFA may terminate a trustee’s administration, revoke their approval, or initiate criminal prosecution. Under the MPF legislation, a conviction for certain offences can lead to a maximum fine of $200,000 and imprisonment for up to 2 years, making statement IV a correct reflection of the law.

**Takeaway:** The regulatory framework provides the MPFA with a multi-tiered enforcement toolkit, ranging from administrative remedial orders and financial penalties to the suspension of duties and criminal prosecution for serious statutory breaches. All of the above. Therefore, all of the above statements are correct.

Correct: Statement I is accurate because the MPF legislation specifies that while members reaching age 65 or opting for early retirement can choose between a lump sum or installments, all other grounds for withdrawal (such as terminal illness, permanent departure, or total incapacity) must be paid as a lump sum. Statement II is correct as the regulations explicitly allow medical certificates for total incapacity to be issued by either a registered medical practitioner or a registered Chinese medicine practitioner. Statement IV correctly identifies the procedure for unclaimed benefits; if a member reaches retirement age and cannot be located within 6 months after the trustee has issued a notice and taken the required steps, the benefits are classified as unclaimed.

**Incorrect:** Statement III is incorrect because the statutory requirement for a small balance withdrawal (where the balance is $5,000 or less) is that at least 12 months, not 24 months, must have elapsed since the last contribution day for which a mandatory contribution was required to be made to any registered scheme.

**Takeaway:** MPF benefit withdrawal rules are strictly categorized. Only retirement-based withdrawals offer the flexibility of installments, while other grounds require a lump sum. Furthermore, the regulatory framework recognizes both Western and Chinese medical practitioners for health-related claims and sets specific timeframes, such as 12 months for small balance eligibility and 6 months for determining unclaimed status. Therefore, statements I, II and IV are correct.

Correct: According to the MPFA Guidelines on Conduct (Section III.3), a registered intermediary must ensure that any form to be signed by a client is duly completed in all material respects before the client signs it. This requirement is fundamental to ensuring that the client is fully aware of the commitments and instructions they are authorizing, thereby upholding the principle of acting in the client’s best interests and with integrity.

**Incorrect:** It is not permissible to leave material sections blank for later completion, even if the client provides verbal or written authorization, as this creates a risk of inaccurate information being submitted without the client’s direct verification. While providing a copy to the client as soon as reasonably practicable and maintaining records for seven years are also requirements, they do not mitigate the failure to have the form completed prior to the signature. Internal compliance approval cannot override the statutory conduct requirements set out in the Guidelines.

**Takeaway:** To ensure transparency and protect the client’s interests, all material parts of an MPF-related form must be filled in before the client provides their signature; any subsequent alterations must be specifically authenticated or initialed by the client.

Correct: Statements I, II, and III accurately reflect the regulatory requirements for self-employed persons (SEPs) under the MPF system. SEPs between the ages of 18 and 64 are required to enroll in an MPF scheme within 60 days of becoming self-employed. Even if their income is below the minimum relevant income level (currently HK$7,100 per month), the requirement to enroll remains mandatory, although the obligation to contribute is waived. Furthermore, SEPs are permitted to choose between a monthly or a yearly contribution frequency to suit their business cash flow.

**Incorrect:** Statement IV is incorrect because according to the Guidelines on Contribution Arrangement of a Self-employed Person Who Sustains a Loss (IV.18), if a SEP sustains a net loss, they may notify the trustee of the loss. Once the trustee is satisfied, the SEP is not required to make mandatory contributions until their relevant income reaches the minimum level again. They are not forced to pay based on a minimum threshold during a period of loss.

**Takeaway:** While enrolment is mandatory for all eligible self-employed persons regardless of profit, the actual payment of mandatory contributions is contingent upon meeting the minimum income threshold and can be suspended if the business sustains a loss. Therefore, statements I, II and III are correct.

Correct: Statement I is correct because the SFC Code on MPF Products governs the qualifications and experience required for investment managers of MPF products. Statement III is correct because, under the post-authorization requirements set by the SFC, any changes to the investment objectives, constitutive documents, or key operators of an MPF product require prior approval from the SFC.

**Incorrect:** Statement II is incorrect because the MPF regulations provide a specific exception to the unitization requirement for constituent funds that are non-investment linked and provide investment guarantees. Statement IV is incorrect because the mandatory requirement to publish fund prices in leading English and Chinese newspapers applies specifically to Master Trust and Industry schemes; trustees of employer-sponsored schemes are permitted to use alternative means to disclose this information to members.

**Takeaway:** MPF regulation is a dual-agency effort where the MPFA focuses on registration and operational compliance, while the SFC focuses on product authorization, disclosure standards, and the licensing of investment managers. Therefore, statements I and III are correct.

Correct: According to the Mandatory Provident Fund Schemes Ordinance, a subsidiary intermediary is legally required to notify the MPFA in writing of any change in their name, address, or contact details within 7 working days of the change occurring. Failure to comply with this reporting requirement without a reasonable excuse is a criminal offence that carries a maximum fine of $50,000.

**Incorrect:** Timeframes such as 7 calendar days, 14 working days, or one month are inconsistent with the statutory 7-working-day requirement for reporting administrative changes. Furthermore, while the MPF framework includes various penalties, the specific fine for failing to report these changes is $50,000, making options suggesting $10,000 or $20,000 incorrect.

**Takeaway:** Registered intermediaries must proactively report personal and contact information changes to the MPFA within 7 working days to ensure regulatory transparency and avoid a significant statutory fine.

Correct: Statement I is accurate as Guideline VI.2(s) requires a principal intermediary to report any failure to comply with the MPFSO or Guidelines to the frontline regulator and the industry regulator within 14 working days of identifying the failure. Statement III is correct because Guideline VI.2(e) stipulates that complaints of a serious nature, such as forgery of client documents or unauthorized transfer of benefits, must be reported to the regulators immediately. Statement IV is correct according to Guideline VI.2(r), which requires controls to prevent subsidiary intermediaries from receiving cash or uncrossed cheques to mitigate the risk of fraud.

**Incorrect:** Statement II is incorrect because the MPFA Guidelines VI.2(p) and (t) specifically require that all audio and written records, as well as information about the conduct of regulated activities, be retained for a minimum period of seven years, rather than five years.

**Takeaway:** Principal intermediaries must implement rigorous oversight, including a 7-year record retention policy, a 14-working-day reporting window for compliance breaches, and immediate notification for criminal or serious complaints to ensure regulatory compliance and investor protection. Therefore, statements I, III and IV are correct.

Correct: Statements I, II, III, and IV accurately reflect the regulatory requirements under the MPFA Guidelines when a ‘risk mismatch’ occurs. The intermediary is required to warn the client of the mismatch and explain the fund’s risks (I), document the client’s specific reasons for the choice and obtain a signature (II), maintain these records for at least seven years (III), and ensure an audit trail through audio recording or alternative post-sale verification methods (IV).

**Incorrect:** All statements provided are mandatory requirements under the Guidelines. Failing to perform any of these actions would constitute a failure to comply with the conduct requirements regarding suitability and risk matching in the MPF system.

**Takeaway:** When a client insists on an MPF constituent fund that exceeds their assessed risk profile, the registered intermediary must follow a strict protocol of disclosure, documentation, and record-keeping to ensure the client understands the implications of the mismatch. I, II, III & IV. Therefore, I, II, III & IV is correct.

Correct: According to the Mandatory Provident Fund Schemes Ordinance, when natural persons are appointed as individual trustees, there must be at least two of them. These individuals must ordinarily reside in Hong Kong and be of good reputation and character. Furthermore, they are required to provide a performance guarantee (such as a bank guarantee or insurance policy) to cover potential losses arising from a failure to perform their duties. This guarantee must be equivalent to 10% of the scheme’s net asset value, but it is subject to a maximum cap of HK$10 million.

**Incorrect:** A single individual trustee is not permitted, as the law requires a minimum of two. While corporate trustees must meet specific paid-up capital and net asset requirements (often HK$150 million), individual trustees are instead regulated through the performance guarantee mechanism. The residency requirement is ‘ordinarily resident’ rather than strictly ‘permanent resident’. Finally, the performance guarantee is specifically set at 10% of the net asset value with a HK$10 million ceiling; other percentages or the absence of a cap do not align with the statutory requirements.

**Takeaway:** To ensure accountability and financial security, individual MPF trustees must be appointed in groups of at least two, reside in Hong Kong, and maintain a performance guarantee capped at HK$10 million based on 10% of the scheme’s assets.

Correct: Statements I, II, III, and IV are all fundamental ongoing requirements for an MPF exempted ORSO scheme under the Mandatory Provident Fund Schemes (Exemption) Regulation. Specifically, the scheme must submit an annual return and auditor’s report within four months of the financial year-end (I), notify the MPFA of changes in trustee details or scheme particulars within one month (II), comply with the 10% restriction on employer-related investments (III), and ensure members receive annual benefit statements to stay informed of their accrued benefits (IV).

**Incorrect:** Any combination that excludes one or more of these statements is incorrect because these are all mandatory obligations. For example, failing to report a change in trustee or exceeding the investment limit in the sponsoring employer’s business would jeopardize the scheme’s exempted status. There is no exemption from providing annual benefit statements simply because the scheme is an ORSO scheme rather than an MPF scheme.

**Takeaway:** Maintaining the exempted status of an ORSO scheme requires strict adherence to reporting deadlines, investment limits, and disclosure requirements as stipulated in the MPF Exemption Regulation. I, II, III & IV. Therefore, I, II, III & IV is correct.

Correct: According to the Mandatory Provident Fund Schemes (General) Regulation, the primary investment manager of an MPF scheme or an Approved Pooled Investment Fund (APIF) must satisfy several stringent criteria to ensure professional and prudent management. These include being a company incorporated in Hong Kong, maintaining a minimum paid-up share capital and net assets of HK$10 million, and being licensed by the Securities and Futures Commission (SFC) for Type 9 (asset management) regulated activity. Additionally, the manager must be independent of the scheme’s trustee and custodian to avoid potential conflicts of interest. Therefore, all four listed requirements are mandatory.

**Incorrect:** Any combination that excludes one of these four pillars is legally insufficient. For example, omitting the independence requirement would fail to address the statutory safeguards against self-dealing, while omitting the local incorporation or capital requirements would ignore the specific standards for financial substance and regulatory oversight required by the MPFA.

**Takeaway:** To safeguard scheme assets, a primary MPF investment manager must be a locally incorporated entity with at least HK$10 million in capital/net assets, hold an SFC Type 9 license, and remain independent of the trustee and custodian.

Correct: Statements I, III, and IV are accurate descriptions of the World Bank’s five-pillar framework and the specific characteristics of the MPF System. The MPF is defined as the second pillar because it is a mandatory, privately-managed, and fully-funded system. It operates on a defined contribution basis, where the final benefits are the sum of contributions and investment returns. Pillar Zero refers to non-contributory, publicly-financed social safety nets.

**Incorrect:** Statement II is incorrect because voluntary savings, such as personal insurance and private investments, are classified under Pillar Three of the World Bank framework. Pillar One refers to mandatory, contributory, and publicly-managed systems.

**Takeaway:** The MPF System is an employment-based, defined contribution system that forms the second pillar of Hong Kong’s retirement protection framework, designed to complement other pillars like public social assistance and voluntary personal savings. Therefore, statements I, III and IV are correct.

Correct: Statements I, II, and III are accurate descriptions of the trust arrangement and fiduciary duties under the MPF system. A trustee serves as the registered owner of the assets but is legally distinct from the beneficial owners (the scheme members). The trust deed is the primary legal instrument that stipulates the trustee’s powers and duties. Furthermore, if a trustee’s breach of duty leads to a loss in scheme assets, the trustee is personally liable to restore those assets or provide financial compensation from its own funds.

**Incorrect:** Statement IV is incorrect because a trustee is prohibited from using the scheme’s assets to indemnify itself against liabilities or losses caused by its own negligence or breach of trust. One of the fundamental protections for MPF members is that the trustee must not apply scheme property to cover its own mistakes or failures in fiduciary responsibility.

**Takeaway:** Under the MPF framework, the trustee holds a fiduciary position of trust, meaning they must act solely in the interests of the beneficiaries. This includes a strict requirement to restore any losses caused by a breach of trust using the trustee’s own resources rather than the scheme’s assets. Therefore, statements I, II and III are correct.

Correct: According to the MPFA Guidelines, when a client insists on selecting a constituent fund with a risk level higher than their assessed risk profile (a risk mismatch), the registered intermediary must perform several specific actions. These include informing the client of the mismatch, explaining the risks of the chosen fund, confirming it is the client’s own decision, and documenting the client’s reasons for the choice. Furthermore, the conversation regarding this mismatch must be audio-recorded if such a system is available; if not, the intermediary must implement a post-sale call or post-sale confirmation to provide a robust audit trail of the advice and the client’s decision.

**Incorrect:** It is incorrect to suggest that the intermediary must refuse the transaction, as the MPF system allows clients to make their own investment decisions provided they are fully informed of the risks and the mismatch. Simply obtaining a signed document without the accompanying audio recording or post-sale confirmation process fails to meet the specific regulatory requirements for high-risk mismatches. Suggesting an alternative scheme to avoid the documentation process is a circumvention of conduct requirements and does not fulfill the intermediary’s duty to properly manage a risk mismatch scenario.

**Takeaway:** When a client chooses an MPF fund that exceeds their assessed risk tolerance, the intermediary must ensure the risk mismatch is clearly explained and documented, and the process must be supported by an audio recording or a post-sale verification procedure to protect both the client and the intermediary.

Correct: Statements I, II, and III reflect the conduct requirements for MPF intermediaries. According to the MPFA Guidelines, an intermediary must provide and explain the “Guide to Transfer Benefits under Employee Choice Arrangement” and the associated timeframe, including the non-investment period (III.44 and III.46). If a client is transferring out of a guaranteed fund, the intermediary must warn them of the potential loss of the guarantee and obtain a signed acknowledgement of this understanding (III.48 and III.49). Additionally, when comparing fees, the intermediary is required to highlight their long-term impact on returns using examples (III.51).

**Incorrect:** Statement IV is incorrect because Guideline III.42 specifically prohibits registered intermediaries from predicting, projecting, or forecasting the future or likely performance of a constituent fund. While they may discuss the general market outlook, they must avoid making specific performance claims to prevent misleading the client.

**Takeaway:** When facilitating scheme transfers, intermediaries must focus on procedural transparency, the risks of losing specific fund benefits like guarantees, and the impact of costs, while strictly adhering to the prohibition against performance forecasting. Therefore, statements I, II and III are correct.

Correct: Under the Mandatory Provident Fund Schemes (General) Regulation, every constituent fund within an MPF scheme is required to maintain an effective currency exposure in Hong Kong dollars of not less than 30% of its net asset value. This rule is designed to ensure that a portion of the members’ retirement savings is protected from fluctuations in foreign exchange rates, as the ultimate benefits will be paid out in the local currency. This exposure can be achieved through physical holdings of HKD-denominated assets or through currency hedging using derivatives.

**Incorrect:** The suggestions that the minimum requirement is 50% or 15% are inaccurate as they do not align with the statutory limit prescribed by the MPFA. Furthermore, the notion that there is no currency exposure requirement for funds focused on overseas markets is false; the 30% Hong Kong dollar exposure rule applies universally to all constituent funds to mitigate currency risk for the scheme members.

**Takeaway:** All MPF constituent funds must adhere to a minimum 30% Hong Kong dollar effective currency exposure requirement to provide a baseline of currency stability for accrued benefits.

Correct: Statements I, II, and IV accurately reflect the demographic and social drivers for the MPF system. Hong Kong faces a significant ageing trend where the elderly population is expected to rise to 36% by 2064. This shift increases the dependency ratio, placing a heavier burden on the working population. Furthermore, traditional family support is no longer a guaranteed safety net due to resource constraints and changing family dynamics, necessitating a structured retirement protection system.

**Incorrect:** Statement III is incorrect because the MPF system is intended to be one of the pillars of retirement protection (specifically the second pillar of the World Bank’s multi-pillar model), not a complete replacement for personal savings or government-funded social safety nets. It is designed to complement, rather than eliminate, other forms of retirement preparation and social security measures.

**Takeaway:** The MPF system was established to address the long-term financial risks associated with an ageing population and the declining effectiveness of traditional family-based support systems in Hong Kong, ensuring a more sustainable multi-pillar retirement framework. Therefore, statements I, II and IV are correct.

Correct: According to the regulations governing Mandatory Provident Fund (MPF) schemes, if a contribution day falls on a Saturday, a public holiday, a gale warning day, or a black rainstorm warning day (as defined under the Interpretation and General Clauses Ordinance), the deadline is legally extended. The payment and the accompanying remittance statement must be submitted to the trustee on the next following day that is not one of those specified days.

**Incorrect:** The suggestion that payment must be made on the preceding Friday is incorrect because the law allows for an extension rather than requiring early submission. Confusing the contribution day with the 60-day permitted period is a common error; the 60-day period for enrolling an employee is a fixed duration that does not shift for holidays or weather, whereas the contribution day for monthly payments does. Finally, while there is a 7-working-day requirement in the regulations, it pertains to providing a pay-record to the employee after the contribution has been made, not to a grace period for the contribution payment itself.

**Takeaway:** While the 60-day permitted period for enrollment remains fixed regardless of the calendar, the MPF contribution day is extended to the next business day if it coincides with a Saturday, public holiday, or severe weather warning (Gale or Black Rainstorm).

Correct: Statements I, II, and III are accurate. Under the Mandatory Provident Fund Schemes Ordinance, all mandatory contributions made by both the employer and the employee are fully and immediately vested in the member. The ‘non-refusal’ provision ensures that a trustee cannot reject an application from an employer or self-employed person who meets the statutory requirements for enrollment. Furthermore, for employees earning below the minimum relevant income level (currently $7,100 per month), the employee is exempt from making contributions, but the employer is still required to contribute 5% of the employee’s relevant income.

**Incorrect:** Statement IV is incorrect because the Employee Choice Arrangement (ECA) is specifically designed to allow employees to transfer only the accrued benefits derived from their own (employee) mandatory contributions made during their current employment. It does not permit the transfer of the employer’s mandatory contributions from the current employment account while the employee is still employed by that firm.

**Takeaway:** A clear distinction must be made between the vesting of mandatory contributions, which is immediate, and the portability of those contributions under the ECA, which is restricted to the employee’s portion for current employment. I, II & III only. Therefore, statements I, II and III are correct.

Correct: Under the Mandatory Provident Fund Schemes Ordinance, the trust arrangement provides a fundamental layer of protection by ensuring that the assets of the scheme are legally separated from those of the trustee, the employer, and other service providers. This means that if any of these parties face financial difficulties or insolvency, their creditors cannot claim the scheme members’ assets. Furthermore, the law stipulates that only corporate trustees are permitted to manage Master Trust Schemes and Industry Schemes, whereas individual trustees are only allowed for Employer-sponsored Schemes.

**Incorrect:** Individual trustees are strictly prohibited from managing Master Trust Schemes, regardless of their expertise; they are only eligible to act as trustees for Employer-sponsored Schemes. The assertion that creditors can claim scheme assets during an employer’s bankruptcy is false, as the primary advantage of the trust structure is to shield member benefits from such claims. Additionally, fiduciary duty requires that all profits derived from trust properties must be transferred to the beneficiaries (the scheme members), and the trustee cannot retain these profits for themselves.

**Takeaway:** The trust structure is the cornerstone of MPF asset protection, ensuring legal segregation from the service providers’ liabilities, and the law mandates corporate trustees for schemes involving multiple employers to ensure higher standards of capital adequacy and professional management.

Correct: To qualify for an early withdrawal of MPF accrued benefits on the ground of a ‘small balance,’ a scheme member must satisfy three specific statutory conditions: the balance in the particular MPF scheme must not exceed $5,000, at least 12 months must have elapsed since the last contribution day for which a mandatory contribution was required, and the member must not have accrued benefits in any other MPF scheme. Additionally, the member must declare that they do not intend to become employed or self-employed again.

**Incorrect:** The claim for permanent departure is a ‘once in a lifetime’ entitlement; a member cannot use this ground multiple times if they return to Hong Kong and later depart again. For terminal illness, the medical certificate must certify a life expectancy of 12 months or less, not 24 months. While most early withdrawal grounds require a lump sum payment, members attaining the age of 65 or qualifying for early retirement at age 60 have the option to withdraw benefits in a lump sum or by instalments.

**Takeaway:** MPF early withdrawal rules vary by ground; specifically, small balance claims require a balance of $5,000 or less and a 12-month inactivity period across all schemes, while permanent departure claims are strictly limited to once per lifetime.