Revised Guidelines on Conduct Requirements for Registered Intermediaries

The Mandatory Provident Fund Schemes Authority (MPFA) has published a new circular in which it informs of revisions to its Guidelines on Conduct Requirements for Registered Intermediaries (RIs) which will come into force on March 1, 2024.
Specifically, the MPFA has recently reviewed those guidelines, particularly the disclosures that intermediaries must make to clients in the sales process with a view on preventing conflicts of interest. Currently, RIs are required to provide their clients with a statement at the time of offering advice, inducement, or invitation. This statement should include information on whether the RI will charge the client direct fees for its service or if it will receive compensation through other means (like commissions or bonuses or non-monetary „gifts“). Additionally, the statement should clarify whether the benefits the RI receives may vary depending on the client’s choice of MPF scheme or constituent fund.
To enhance these disclosures and to further protect investors, the MPFA has revised the guidelines to require RIs to
(1) disclose monetary benefits received by principal intermediaries (PIs) in relation to their registered activities upon a client request. Modifications have thereby been made to paragraph III.36(b) which now reads:
„A registered intermediary should provide the client with a statement (at the time of the invitation, inducement or advice) on whether the principal intermediary and/or any of its subsidiary intermediaries will charge the client any direct fees for the services to be provided or will be compensated (either directly or indirectly) in some other manner (such as commission or salary bonus) in respect of the invitation, inducement or advice. The statement should also set out whether the benefits receivable would be different depending on the choice of the registered scheme(s) or constituent fund(s) made by the client. The statement can be a generic disclosure of the nature of monetary and nonmonetary benefits receivable by the principal intermediary and/or any of its subsidiary intermediaries.“
(2) require written consent from clients for receiving both monetary and non-monetary benefits in paragraph III.36A which now reads:
„The principal intermediary and/or the subsidiary intermediary should obtain written and express consent from the client for receiving monetary and non-monetary benefits prior to or at the point of executing the client’s instructions. A record of the written and express consent should be kept by the principal intermediary for a minimum period of seven years.“
(3) remind RIs to adhere to anti-bribery guidelines and the Prevention of Bribery Ordinance. Paragraph III.8 has thereby been modified and now reads:
„A registered intermediary should be familiar with and not contravene the Prevention of Bribery Ordinance (Cap 201) and follow all relevant guidelines issued by the Independent Commission Against Corruption concerning matters in relation to the carrying on of regulated activities by the registered intermediary“.
To conclude, the MPFA notes that the new guidelines and requirements therein will come into force on March 1, 2024. Intermediaries should ensure that they „put in place procedures and control measures to comply with the requirements“ from then on.