Consumer Council Submission to the Financial Services and the
Treasury Bureau on Enhanced Regulation of Mandatory Provident Fund
Intermediaries (July 08, 2011)
1. The Consumer Council (the Council) is
pleased to submit views to the Financial Services and the Treasury
Bureau (FSTB) regarding the paper entitled "Enhanced Regulation of
Mandatory Provident Fund Intermediaries".
2. The following sets out for consideration of
FSTB the Council's views on the legislative proposals raised in the
paper that have direct implications to the interests of consumers
of MPF products.
Regulation of MPF
Intermediaries
3. The Council welcomes the Government's
proposal to strengthen the protection of scheme members' interest
through establishing a statutory regulatory framework for MPF
intermediaries in Hong Kong.
4. On the whole, the Council fully supports
introduction of legislation to prohibit against engaging in
regulated MPF sales and marketing activities by persons other than
registered MPF intermediaries; and provision of a range of
disciplinary tools to the Mandatory Provident Fund Schemes
Authority (MPFA) and the Frontline Regulators (FRs) to deter
non-compliance with the statutory requirements for MPF
intermediaries.
5. To secure effectiveness, the Council
strongly urges that surveillance be carried out by MPFA and FRs to
closely monitor and deter any improper sales and marketing
practices of MPF intermediaries (e.g. setting up of promotion
booths to get quick deals on the spot which may act to the
disadvantages of scheme members in that they do not have adequate
information or time to make an informed decision). This is
important for protection of scheme members' interest since more
direct and aggressive sales activities could be expected upon the
implementation of the Employee Choice Arrangement (ECA).
6. With regard to the proposed shared
regulatory responsibility between MPFA and FRs, the Council
considers that if this approach is to be adopted, it will be
important for MPFA and FRs to make collaborative efforts to ensure
regulatory consistency, so as to achieve effective supervision and
discipline of MPF intermediaries coming under different FRs. In
this regard, the Council supports putting in place the proposed
Appeal Board and independent Process Review Panel to enhance
consistency among FRs in terms of enforcement.
7. The Council is of the further view that
regulation should be comprehensive enough so as not to leave any
unregulated areas or regulatory gaps. It would be unsatisfactory if
activities were left unregulated due to lack of clarity as to which
regulator is responsible. The Council welcomes provision in the
proposed MPF Intermediaries Register of the name of the FR
concerned in relation to each registration of an intermediary and
to make the Register accessible to the public. This, at least, will
make it easy for the public to see which FR is the regulator of a
particular intermediary.
8. From the perspective of complaints
handling, the Council is of the view that MPFA as the predominant
regulator for standard setting and registration of MPF
intermediaries should serve as the first contact point for scheme
members to seek general advice in relation to alleged misconduct of
MPF intermediaries. The Council believes it is necessary for
details to be given to the public as to the role of MPFA in terms
of complaints handling.
9. As regards the proposed conduct
requirements, the Council suggests adding a requirement for MPF
intermediaries to disclose to prospective clients at the time of
carrying out MPF sales and marketing activities the level of
commission (or benefits) receivable by the intermediaries for the
sale of the relevant MPF products. Commission disclosure could
mitigate any potential conflicts of interest especially since the
level of commissions may incentivize MPF intermediaries to promote
to prospective clients MPF products which are not appropriate to
their circumstances.
10. In relation to the proposal of requiring
MPF intermediaries to make adequate disclosure of relevant material
information in dealing with their clients, the Council believes
that intermediaries should also be required to explain to their
clients all significant consequences, or disadvantages of any
transfer of benefits. Any suspected distortions such as provision
of inaccurate or misleading statements which induced clients to
transfer benefits to another schemes or funds should be subject to
investigation and disciplinary action. In this regard, reference
can be drawn from the practice in the insurance industry in respect
of replacement of insurance policies.
11. Furthermore, the Council is of the view
that consideration should be given to introduce cooling-off period,
where appropriate, to render full protection to scheme members.
Provision of a cooling off period can provide an effective bar to
later complaints as a result of improper sales practices.
12. The Council considers that introducing
legislation on mandatory disclosure of prescribed material
information by intermediaries and compliance check (both pre-sales
and post-sales controls) by trustees and regulators are essential
to ensure that relevant information is provided and suitable MPF
products are promoted to scheme members. This will enhance consumer
confidence in the MPF market.
Establishment of an E-platform for
Transfer of MPF Benefits
13. The Council welcomes the proposal of MPFA
to establish and operate an electronic transfer system (E-platform)
to prepare for substantial increase in the number of elections by
scheme members for transfer of benefits among MPF schemes upon the
implementation of the ECA.
14. Considering that a major cause of scheme
members・ complaints is related to delay in fund processing and
accuracy of fund transfers, the Council supports making it
mandatory for all MPF trustees to participate in the system and
have all transfers of MPF benefits processed by the E-platform.
15. As a value-added feature, the Council is
of the opinion that scheme members should be allowed to access the
E-platform to keep track of their fund transfer status and if
possible to view a consolidated record of their various fund
accounts (since scheme members may easily lose track of their MPF
accounts if they have changed jobs a number of times and have not
combined the accounts into a single account). This feature will
enhance the value of the E-platform beyond just facilitating the
trustees・ processing of scheme members・ elections for transfer of
benefits.
16. Allowing scheme members・ access to the
E-platform will also improve transparency of the fund transfer
process, and make it easier to manage scheme members・ expectation
about the processing time and enable them to keep track of their
MPF accounts.
17. The establishment of the E-platform will
help to minimize the costs associated with transfers of benefits.
As such the Council sees in it an opportunity for MPFA to explore
with the MPF industry the lowering of the MPF administration
fees.
Consumer Council
July 2011
