Mandatory Provident Fund Quiz 26

Correct: For new members who join an MPF exempted ORSO registered scheme, their “minimum MPF benefits” (MMB) are subject to strict preservation, portability, and withdrawal requirements. This means the MMB portion of their benefits generally cannot be accessed until the member reaches the age of 65, or meets other specific statutory criteria such as early retirement at age 60, permanent departure from Hong Kong, total incapacity, terminal illness, or death. Furthermore, if the member changes employment, the MMB must be transferred to an MPF scheme rather than being paid out or left in the ORSO scheme indefinitely, subject to specific exceptions.

**Incorrect:** The assertion that MMB can be forfeited upon dismissal for cause is false; regulations explicitly state that a trustee cannot forfeit a member’s minimum MPF benefits even in cases of dismissal for misconduct. The formula for calculating MMB uses a multiplier of 1.2 times the final average monthly relevant income (capped at $30,000), not 1.5. Additionally, the requirement for an employer to display the MPF exemption certificate at their principal office is a mandatory ongoing requirement regardless of the number of members enrolled in the scheme.

**Takeaway:** While ORSO schemes provide an alternative to MPF schemes, new members are bound by “minimum MPF benefit” rules that mirror MPF preservation standards to ensure a baseline of retirement protection that is portable and protected from forfeiture.

Correct: According to the MPF Guidelines, a client with a low level of education (primary level or below) is classified as a vulnerable client. When such a client makes a ‘key decision,’ such as transferring out of a guaranteed fund, the registered intermediary must provide extra care. This involves either offering the client the opportunity to have a companion or an additional staff member witness the selection process, or conducting an audio-recorded post-sale call within seven working days. This call must be performed by an authorized person of the principal intermediary who was not the subsidiary intermediary involved in the original transaction.

**Incorrect:** The requirement for record-keeping for these specific interactions is seven years, not five. Furthermore, the post-sale call cannot be conducted by the same subsidiary intermediary who handled the initial regulated activity; it must be an independent authorized person to ensure the integrity of the verification. While providing simplified information is good practice, it does not fulfill the specific regulatory ‘extra care’ requirements of witnessing or post-sale calls defined in the guidelines.

**Takeaway:** Registered intermediaries must identify vulnerable clients based on education or impairment and implement specific witnessing or independent post-sale verification procedures whenever a key decision, such as moving funds out of a guarantee, is made.

Format your explanation in THREE separate paragraphs with an empty line between each: Correct: Industry Schemes are specifically designed for the catering and construction industries, which are characterized by high labor mobility and daily wage practices. A key benefit is that a casual employee does not need to change schemes or transfer accrued benefits when switching jobs, provided both the old and new employers are participating in the same Industry Scheme. Furthermore, the standard 60-day employment rule for MPF coverage does not apply to casual employees in these two specific industries, ensuring they are covered from their first day of work.

**Incorrect:** Master Trust Schemes also pool contributions from various employers to achieve economies of scale, so this is not a unique feature of Industry Schemes. Limiting membership to a single employer and its associates describes an Employer Sponsored Scheme, which is typically only cost-effective for very large corporations. While Industry Schemes are tailored for the catering and construction sectors, it is optional, not compulsory, for employers in these industries to use them; they are free to enroll their employees in a Master Trust Scheme instead.

**Takeaway:** Industry Schemes provide administrative efficiency for casual workers in high-mobility sectors by allowing them to maintain a single account across different employers within the same scheme and by removing the 60-day employment threshold for coverage.

Correct: Bond prices share an inverse relationship with market interest rates; as rates decline, the fixed coupon of an existing bond becomes more valuable, driving its price up. Furthermore, bonds represent a creditor relationship rather than ownership, and in the event of the issuer’s insolvency, bondholders are legally entitled to be repaid from any remaining assets before stockholders receive any distribution. These points accurately reflect the structural and market behaviors of fixed-income securities compared to equities.

**Incorrect:** The assertion that all bonds must possess a fixed maturity date and a predetermined coupon rate is false because perpetual bonds have no maturity date and zero-coupon bonds do not make periodic interest payments. Consequently, any statement suggesting that these features are universal requirements for all bond instruments is factually inaccurate.

**Takeaway:** A key distinction between bonds and equities lies in the nature of the investment (debt vs. ownership) and the priority of claims during liquidation, alongside the characteristic inverse price sensitivity of bonds to interest rate fluctuations.

Correct: The Net Asset Value (NAV) per unit is calculated by taking the aggregate market value of all underlying investments held by the fund plus any cash holdings, then subtracting all accrued liabilities, which include administrative and management fees payable. This net figure represents the total value of the fund’s assets belonging to the members, which is then divided by the total number of units currently issued to determine the price per individual unit.

**Incorrect:** Approaches that suggest deducting management fees only at the point of redemption are incorrect because fees must be accrued daily to ensure the NAV reflects the true value of the fund for all members. Similarly, excluding cash holdings or failing to subtract accrued expenses would lead to an inaccurate valuation of the fund’s net position, as cash is an asset and accrued fees are obligations that reduce the fund’s total value.

**Takeaway:** For MPF constituent funds, the NAV per unit must reflect the net position after all operating expenses and management fees have been accounted for, ensuring that the unit price accurately represents the current market value of a member’s investment.

Correct: Statements II, III, and IV are permissible under the exceptions listed in Guideline III.7 of the MPFA Guidelines on Conduct. These exceptions allow for fee discounts provided as bonus units or credits within the MPF account, non-monetary benefits (like additional services) through a membership program approved by the trustee or sponsor, and direct reductions in the intermediary’s own service fees. These are viewed as acceptable because they either lower the cost of the MPF product or provide legitimate value-added services without the distorting effect of direct cash incentives.

**Incorrect:** Statement I is prohibited under Guideline III.6. Registered intermediaries must not offer any direct or indirect rebates, gifts, or incentives—specifically including monetary benefits like cash payments to a personal bank account—to encourage a client to transfer benefits or join a scheme. Such practices are restricted to ensure that clients make decisions based on the suitability and performance of the scheme rather than short-term financial inducements.

**Takeaway:** While the MPF regulatory framework generally prohibits incentives to prevent improper switching of schemes, it permits specific fee-related discounts and approved non-monetary membership privileges that are integrated into the scheme’s structure or the intermediary’s own fee arrangement. II, III & IV only. Therefore, statements II, III and IV are correct.

Correct: Under the regulatory framework for Mandatory Provident Fund (MPF) products, a Class G insurance policy is characterized by providing guarantees on capital or returns. For such a policy to be valid, it must be supported by a guarantor. This guarantor can be the insurance company that issues the policy itself, or it can be a third-party financial institution, provided that the third party is authorized by the Monetary Authority (MA). This ensures that the guarantee is backed by a regulated entity with sufficient financial standing.

**Incorrect:** It is a misconception that insurance companies are prohibited from managing their own insurance funds; the regulations allow the fund to be managed either by the issuing insurance company or by an appointed professional investment manager. Additionally, while Class G policies provide guarantees, they are not synonymous with Money Market Funds; Money Market Funds have specific requirements to invest in short-term interest-bearing securities like treasury bills and do not necessarily carry the structural guarantee of a Class G policy. Finally, the primary objective of a fund offering capital guarantees is typically capital preservation or modest growth, rather than the high capital growth objective associated with aggressive equity funds.

**Takeaway:** Class G insurance policies in the MPF system provide capital or return guarantees that must be backed by a qualified guarantor, which can be the issuing insurer or a financial institution authorized by the Monetary Authority.

Correct: Statement I accurately describes the Employee Choice Arrangement (ECA), which empowers employees to transfer accrued benefits derived from their own mandatory contributions to a scheme of their choice once per calendar year. Statement II is correct as the Code on Disclosure for MPF Investment Funds mandates that trustees issue Fund Fact Sheets at least twice every financial year, and these documents must include essential data such as the Fund Expense Ratio (FER) and the fund’s net asset value.

**Incorrect:** Statement III is incorrect because the MPF regulations strictly prohibit trustees from imposing fees or financial penalties for the transfer of accrued benefits; only necessary transaction costs payable to third parties (not the trustee) are permitted. Statement IV is incorrect because the On-going Cost Illustration (OCI) is specifically not required for MPF Conservative Funds or certain guaranteed funds, although a separate illustrative example is required for MPF Conservative Funds.

**Takeaway:** MPF scheme members enjoy portability of their own mandatory contributions under the ECA without administrative transfer fees, supported by mandatory periodic disclosures like Fund Fact Sheets to ensure transparency of performance and costs. Therefore, statements I and II are correct.

Correct: Statements I, II, and IV accurately reflect the regulatory requirements under the MPF Guidelines. Intermediaries are required to retain audio, written, and business conduct records for a minimum of seven years. Any identified failure to comply with the MPFSO or related guidelines must be reported to the frontline regulator (and industry regulator, if applicable) within 14 working days. Additionally, to prevent fraud and misappropriation, principal intermediaries must have controls to ensure subsidiary intermediaries do not accept cash or uncrossed cheques, ensuring payments are made directly to the approved trustee or the scheme.

**Incorrect:** Statement III is incorrect because the Guidelines specify that complaints of a criminal nature (such as forgery or misappropriation) or other serious matters (such as unauthorized transfers) must be reported immediately to the frontline regulator and the industry regulator. While a summary of all complaints is indeed provided to the MPFA on a quarterly basis, serious or criminal allegations require immediate escalation rather than waiting for the periodic summary.

**Takeaway:** Registered intermediaries must adhere to strict record-keeping durations (7 years), specific reporting timelines for compliance failures (14 working days), and immediate notification protocols for serious or criminal complaints to maintain market integrity. Therefore, statements I, II and IV are correct.

Correct: Statement I is correct as the standard financial requirement for a registered trust company acting as a custodian is a paid-up share capital and net assets of at least $150 million each, though exceptions exist for a $50 million threshold under specific conditions. Statement III is correct because the 60-day employment rule does not apply to casual employees in the two designated industries (construction and catering); they are covered by the MPF system from their first day of employment.

**Incorrect:** Statement II is incorrect because participation in an Industry Scheme is optional for employers in the construction and catering sectors; they may choose to participate in a Master Trust Scheme instead. Statement IV is incorrect because Master Trust Schemes pool the contributions of different, unrelated employers and self-employed persons to achieve economies of scale, whereas membership restricted to a single employer and its associates defines an Employer Sponsored Scheme.

**Takeaway:** Intermediaries must distinguish between the general 60-day rule for standard employees and the immediate coverage required for casual employees in designated industries, while also understanding the specific capital requirements for custodians to ensure the safety of scheme assets. I & III only. Therefore, statements I and III are correct.

Correct: Statements I, II, and IV are accurate according to the Mandatory Provident Fund Schemes Ordinance. Approved trustees must maintain a minimum paid-up share capital and net assets of HK$150 million to ensure financial stability. Professional indemnity insurance is a mandatory requirement designed to protect scheme assets against risks such as fraud or negligence by the trustee or its delegates. Furthermore, investment managers must be incorporated in Hong Kong and hold a Type 9 (asset management) license from the Securities and Futures Commission (SFC) to ensure they are subject to local regulatory oversight.

**Incorrect:** Statement III is incorrect because the Compensation Fund is specifically designated as a “fund of last resort,” not a primary source of recovery. Moreover, the Compensation Fund (and professional indemnity insurance) does not cover losses attributable to investment risks or market fluctuations in the ordinary course of business; it only covers losses resulting from misfeasance or illegal conduct.

**Takeaway:** The security of MPF assets is maintained through a “safety net” that includes high capital entry barriers for trustees, mandatory insurance for operational failures, and a government-backed Compensation Fund for cases of illegal conduct. I, II & IV only. Therefore, statements I, II and IV are correct.

Correct: Relevant income for a relevant employee is defined broadly to include all monetary payments such as wages, salary, leave pay, fees, commissions, bonuses, gratuities, perquisites, or allowances (including housing allowances paid in cash) that are paid or payable by an employer to an employee in consideration of their employment. In this scenario, the base salary, performance-based commission, and cash housing allowance all meet these criteria and must be included in the calculation.

**Incorrect:** Statutory severance payments and long service payments are specifically excluded from the definition of relevant income under the Mandatory Provident Fund Schemes Ordinance. Therefore, including the severance payment in the calculation would be a violation of the guidelines. Conversely, excluding commissions or cash-based allowances is incorrect because these are standard components of an employee’s remuneration that the law requires to be factored into the contribution base.

**Takeaway:** While the definition of relevant income encompasses almost all cash-based earnings and allowances provided to an employee, it specifically excludes statutory severance and long service payments to ensure the contribution is based on active employment earnings rather than termination-related compensation.

Correct: Statement I is accurate as guarantors of MPF guaranteed funds may retain earnings to either take as profit or to buffer against periods where the fund underperforms the guarantee level. Statement III is also correct because a reserve charge (or guarantee fee) is a standard deduction from the fund’s assets to compensate the guarantor for the risk they assume.

**Incorrect:** Statement II is false because the relationship between bond maturity and interest rate risk is positive; long-term bonds (those with 10 or more years to maturity) are more susceptible to price fluctuations when interest rates change, not less. Statement IV is false because the defining risk of a guaranteed fund is the default risk of the guarantor (the risk they cannot meet their financial obligation), rather than general market volatility.

**Takeaway:** When evaluating MPF constituent funds, members should recognize that guaranteed funds involve specific costs like reserve charges and guarantor credit risk, while bond fund volatility is primarily driven by the term to maturity and prevailing interest rate environments. Therefore, statements I and III are correct.

Correct: For an MPF Conservative Fund, specific statutory restrictions apply to protect the interests of members. Administrative expenses can only be deducted from the fund if the investment return for a particular month exceeds the prescribed savings rate determined and published by the MPFA. This mechanism ensures that fees do not erode the principal when returns are exceptionally low. Additionally, these funds are prohibited from charging initial fees, redemption charges, or bid-and-offer spreads.

**Incorrect:** It is incorrect to suggest that administrative expenses can be deducted regardless of performance, as the ‘capital preservation’ nature of the fund requires a performance hurdle (the savings rate). Furthermore, the regulations explicitly forbid the imposition of joining fees, redemption charges, or bid-and-offer spreads for MPF Conservative Funds, making any option suggesting these are allowed inaccurate. The approval process for fee changes involves the MPFA and SFC, but the monthly deduction of administrative expenses is governed by the savings rate rule rather than a quarterly SFC approval of costs.

**Takeaway:** The MPF Conservative Fund is unique because its administrative fee structure is performance-linked to a benchmark savings rate, and it is strictly prohibited from applying transactional charges like initial or redemption fees.

Correct: The Mandatory Provident Fund (MPF) System is categorized 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 (where employers and employees both contribute), and privately managed by approved trustees. Furthermore, it is a defined contribution system, meaning the final accrued benefits are determined by the total contributions and the investment performance of the chosen funds, rather than a guaranteed formula.

**Incorrect:** Describing the system as the first pillar is incorrect because the first pillar refers to mandatory, publicly-managed systems. Suggesting it is a non-contributory safety net financed by taxes describes Pillar Zero. Classifying it as a voluntary system managed by the government misidentifies it as Pillar Three and ignores its mandatory nature and private management. Finally, defining it as a defined benefit system is inaccurate, as that would imply a fixed payout based on salary history, which is not how the MPF operates.

**Takeaway:** In the Hong Kong retirement protection landscape, the MPF acts as a privately-managed, mandatory second pillar where the investment risk and reward are borne by the scheme member through a defined contribution structure.

Correct: The Mandatory Provident Fund (MPF) System is built upon three specific pillars: it is employment-based, meaning it covers the employed and self-employed population; it is fully-funded, meaning the benefits are derived from the actual contributions and investment returns accumulated in an individual’s account; and it is privately-managed, meaning the schemes are operated by approved trustees in the private sector rather than the government.

**Incorrect:** Statement IV is incorrect because the MPF System is a defined contribution (DC) scheme, not a defined benefit (DB) scheme. In a DB scheme, the retirement benefit is usually calculated by a formula based on years of service and salary, whereas in the MPF DC system, the benefit depends entirely on the sum of contributions and the net investment performance.

**Takeaway:** Understanding that the MPF System is employment-based, fully-funded, and privately-managed is fundamental to grasping how retirement protection is structured in Hong Kong under the MPFSO. I, II & III only. Therefore, statements I, II and III are correct.

Correct: Statements I, II, and III are accurate reflections of the regulatory framework governing MPF constituent funds. According to the MPF Ordinance and the Code on MPF Investment Funds, all constituent funds must be governed by Hong Kong law and denominated in Hong Kong dollars to ensure local jurisdictional control. For Master Trust and Industry schemes, transparency is maintained by requiring the publication of unit prices in at least one leading English and Chinese newspaper at least once a month. Furthermore, constituent funds are flexible in their structure, allowing for either direct investment in securities like equities and bonds or indirect investment through approved pooled investment funds.

**Incorrect:** Statement IV is incorrect because it misattributes the regulatory duties of the two main oversight bodies. The Mandatory Provident Fund Schemes Authority (MPFA) is the body responsible for the registration of MPF schemes and the overall administration of the system. Conversely, the Securities and Futures Commission (SFC) is responsible for authorizing the schemes and constituent funds, as well as vetting the disclosure of information in offering documents and marketing materials to ensure investor protection.

**Takeaway:** A clear distinction exists between the MPFA’s role in scheme registration and operational oversight and the SFC’s role in product authorization and disclosure vetting, ensuring a robust dual-regulatory regime for MPF products. Therefore, statements I, II and III are correct.

Correct: For employers who settle mandatory contributions via direct debit, the contribution is officially considered paid on the date the trustee receives the employer’s completed remittance statement. This rule ensures that the trustee has the necessary breakdown of individual employee contributions to accompany the payment process.

**Incorrect:** The date the trustee issues the direct debit instruction is the criteria used specifically for self-employed persons (SEPs) who do not need to submit a remittance statement. The date the funds are credited to the MPF scheme’s bank account is the standard for direct credit payments. The date the employer authorizes the bank to perform the transaction is an internal administrative step and does not satisfy the regulatory definition of the payment date.

**Takeaway:** The official payment date for MPF contributions depends on the method used; for employers using direct debit, the receipt of the remittance statement by the trustee is the critical regulatory milestone.

Correct: Under Section 34M of the Mandatory Provident Fund Schemes Ordinance (MPFSO), certain professionals are exempt from the prohibition against giving regulated advice if that advice is provided in a specific context. Specifically, a solicitor, counsel, or certified public accountant does not contravene the ordinance when they provide regulated advice—such as advising a client on when to claim accrued benefits—as long as that advice is wholly incidental to their professional practice. This allows these professionals to provide holistic guidance to their clients without needing to register as MPF intermediaries, provided the MPF advice is not the primary purpose of the engagement.

**Incorrect:** Advice provided through publications is only exempt if the medium is made generally available to the public; publications available only via subscription are explicitly excluded from this exception. Similarly, while trust companies that are not approved trustees have an exemption, it only applies if the advice is incidental to the discharge of their duties, rather than being marketed as a standalone advisory service. Finally, any individual who is not a registered intermediary is prohibited from giving regulated advice for reward or in the course of business, and doing so without an exemption constitutes an offence.

**Takeaway:** While the MPFSO strictly regulates who can provide advice on material decisions like benefit claims, Section 34M provides narrow exemptions for specific professionals (like lawyers and accountants) when the advice is incidental, and for public media, provided the information is not restricted by a subscription model.

Correct: Statement I is correct because under the concept of trust, the trustee is the registered (legal) owner of the property but is strictly prohibited from benefiting from it personally, except for fees or terms expressly permitted in the trust deed. Statement IV is correct because a core feature of a trust is that all income, interest, and capital gains generated by the trust property belong to the beneficiaries (the scheme members) rather than the trustee.

**Incorrect:** Statement II is incorrect because the principle of restoration requires a defaulting trustee to restore lost or reduced property at their own expense; they are legally barred from using the MPF scheme’s assets to indemnify themselves for losses caused by their own breach or mistake. Statement III is incorrect because the trustee’s primary fiduciary duty is to act in the best interests of the beneficiaries (the members) as a whole, not the employer or any other party.

**Takeaway:** MPF trustees serve as fiduciaries who must maintain a clear separation between legal ownership and beneficial interest, ensuring that all scheme gains accrue to members and all losses due to trustee error are personally indemnified by the trustee. Therefore, statements I and IV are correct.

Correct: A scheme where the retirement benefit is calculated based on a formula involving factors like years of service and final salary is classified as a defined benefit scheme. In such schemes, the employer’s contribution rates are not fixed by the scheme rules but are instead determined by an actuary who performs periodic valuations to ensure the fund can meet its future liabilities.

Correct: Statements I, II, and III are correct according to the MPFA Guidelines on Conduct. Registered intermediaries are required to disclose any affiliations with key parties of the scheme, such as the trustee or promoter (III.32). Furthermore, the principal intermediary must maintain records of the disclosure documents provided to clients for a minimum of seven years (III.36). When presenting performance comparisons, intermediaries must ensure they are comparing “like with like” (same fund type) over a long-term period of at least five years where practicable (III.41).

**Incorrect:** Statement IV is incorrect because Guideline III.40 explicitly states that an intermediary should not invite, induce, or advise a client to make a selection based primarily on past investment performance. Even if the performance data covers five years, it should not be the primary basis for the recommendation, and the intermediary must explain that past performance is not a reliable indicator of future results.

**Takeaway:** Compliance with MPF conduct guidelines requires transparent disclosure of affiliations and benefits, diligent record-keeping for seven years, and ensuring that investment performance is never the primary justification for a fund recommendation. Therefore, statements I, II and III are correct.

Correct: Statement I is accurate as the Mandatory Provident Fund Schemes (General) Regulation requires every constituent fund to maintain at least 30% of its assets in Hong Kong dollar currency investments to manage currency risk, and currency forward contracts are explicitly permitted to meet this requirement. Statement II is correct because borrowing money is strictly prohibited except for specific liquidity needs, such as settling investment transactions or paying out accrued benefits to members.

**Incorrect:** Statement III is incorrect because the MPF Conservative Fund is subject to a unique fee restriction where administrative expenses can only be deducted if the fund’s monthly return exceeds the prescribed savings rate published by the MPFA. Statement IV is incorrect because the general investment spread limit for securities issued by any single person is capped at 10% of the fund’s total assets, not 15%.

**Takeaway:** MPF fund managers must navigate specific quantitative restrictions, including a 30% minimum Hong Kong dollar exposure and a 10% single-issuer limit, while ensuring that fee deductions for Conservative Funds remain contingent upon meeting statutory performance benchmarks. Therefore, statements I and II are correct.

Correct: Statements I, III, and IV accurately reflect the regulatory requirements under the Mandatory Provident Fund Schemes Ordinance (MPFSO). Employees of the European Union Office of the European Commission in Hong Kong are classified as exempt persons. Self-employed persons (SEPs) are legally required to enrol in an MPF scheme within the 60-day permitted period regardless of their income level, although they only make contributions if their income meets the minimum threshold. Additionally, MPF trustees are mandated to issue a notice of participation within 30 days of the later of receiving all necessary information or the applicant’s agreement to the scheme’s governing rules.

**Incorrect:** Statement II is incorrect because the exemption status is specific to the qualifying employment or category. According to the MPFSO, a person who is exempt under categories such as the EU Office or an MPF-exempted ORSO scheme may still be required to join an MPF scheme and make contributions in respect of income derived from other employment or self-employment that is not covered by the exemption.

**Takeaway:** MPF exemptions are generally specific to the role or scheme that qualifies for the exemption; they do not provide a blanket exemption for all other sources of income. Furthermore, the duty to enrol (for both employers and self-employed persons) is distinct from the duty to contribute, with the former often being mandatory regardless of income levels. Therefore, statements I, III and IV are correct.

Correct: Statements I, II, and IV are correct. According to MPF regulatory guidelines, to ensure the security of funds and maintain a clear audit trail, employers and self-employed persons (SEPs) should avoid making contribution payments in cash or through MPF intermediaries. Instead, payments should be made directly to the trustees or their designated bank branches/customer service counters. Furthermore, failure to pay mandatory contributions on time triggers a mandatory contribution surcharge and may lead to financial penalties or criminal prosecution by the MPFA.

**Incorrect:** Statement III is incorrect because the contribution surcharge is a statutory requirement that applies immediately upon the failure to pay contributions by the due date. There is no regulatory provision for a “three-warning” grace period before the surcharge is imposed, as the surcharge is intended to compensate members for lost investment opportunities.

**Takeaway:** MPF contributions must be remitted directly to the trustee through secure channels; late payments are subject to immediate surcharges and potential legal or financial sanctions to protect the interests of scheme members. Therefore, statements I, II and IV are correct.

Correct: According to Section 34ZL(1)(d) of the Mandatory Provident Fund Schemes Ordinance (MPFSO), a registered intermediary must have such regard to the client’s particular circumstances as is necessary for ensuring that the regulated activity is appropriate to the client. This means the intermediary has a proactive duty to gather and analyze client-specific information—such as risk tolerance, investment horizon, and financial objectives—before making a recommendation, ensuring the advice is suitable for that specific individual.

**Incorrect:** Simply providing a standardized list of funds without considering the client’s context fails to meet the statutory suitability requirement. Prioritizing the commercial interests of the principal intermediary over the client’s interests is a direct violation of the requirement to act in the best interests of the client and to manage conflicts of interest. Furthermore, an intermediary is never exempt from the duty to assess suitability based on a client’s past history with other providers; the obligation applies to the current regulated activity being performed.

**Takeaway:** The conduct requirements for MPF intermediaries go beyond basic honesty; they include a specific ‘suitability’ obligation that requires the intermediary to ensure any recommended action is appropriate given the client’s unique financial situation and needs.