PLC Paper No. CB(1)705
Senior Assistant Secretary (1)5
(These minutes have been
seen by the Administration)
I Meeting with the Administration
Members continued the scrutiny of proposed amendments to the Mandatory Provident Fund Schemes Ordinance (MPFSO).
Proposed section 25
2. Members noted that under the proposed section 25, the duty to exercise a sufficient degree of care and diligence would also apply to the chief executive of a corporate trustee in addition to the directors.
Proposed section 26
3. Members noted that the proposed section 26 sought to clarify and simplify the existing section and to invalidate attempts to limit an approved trustees liability for certain actions, such as a breach of trust.
Proposed section 27(2)(i) to (k)
4. The newly added section 27(2)(i) to (k) would impose duties on individual trustees or corporate trustees to make disclosures affecting the schemes as prescribed by the relevant regulations.
5. Members noted that section 28(3), which empowered the MPFA to suspend or terminate an approved trustees administration of a registered scheme, would be transferred to proposed section 33.
Proposed section 33
6. The Administration highlighted that the proposed section 33 sought to:-
- empower the MPFA to suspend or terminate an approved trustees administration of a registered scheme;
- require the MPFA to hold an inquiry after suspension to determine if the trustees administration of a registered scheme should be terminated; and
- specify circumstances in which an approved trustees administration was automatically terminated by operation of law.
7. In response to the Deputy Chairman, the Senior Manager/ORSO Interface (SM/OI) clarified that the action of suspension or termination taken under proposed section 33 was specific to a trustees administration of a registered scheme. Powers for the MPFA to suspend and to revoke the approval of trustees, which would deny the trustee of administration of all registered schemes, were provided under proposed sections 20A and 20B.
8. Referring to proposed section 33(1)(b) which stipulated that breaches of guidelines published under section 28 might lead to suspension of the trustees administration of a scheme vis a vis the guidelines mentioned in proposed section 6D, the Chairman was concerned about the existence of different "guidelines" in the MPFSO the breaches of which carried consequences of different gravity.
9. The Senior Assistant Law Draftsman (SALD) advised that even without reference to the guidelines issued under section 28, the MPFA could still impose administrative sanction on the basis of proposed section 33(1)(a) if a trustee was found to have engaged in forbidden investment practices. In this connection, the Senior Assistant Legal Adviser (SALA) added that the proposed sections 6D and section 33 provided for different matters. Section 6D dealt with the general powers for the MPFA to issue guidelines. Its subsection (5) stipulated that contravention of a guideline would not by itself incur a civil or criminal liability. The proposed section 33 however related to the MPFAs powers to impose administrative sanctions on an approved trustee upon the latters breaches of investment guidelines published under proposed section 28.
10. On whether there was a need to give legislative effect to the guidelines, SM/OI said that if the guidelines became statutory provisions, the MPFA might not be able to issue or amend them in a timely manner to cope with contingencies since it took considerable time to effect legislative changes.
Proposed sections 34, 34A, 34B and 34C
11. Members noted that proposed sections 34 to 34C would make provisions for the following matters:-
- enabling an employer sponsored scheme to be wound up voluntarily, but only with the consent of the MPFA under limited circumstances;
- specifying the conditions under which a registered scheme might be wound up by the court;
- providing for an existing registered scheme to merge with another registered scheme of the same kind, such as in the case of the merger of two employer sponsored schemes due to the merger of two employers; and
- allowing an existing registered scheme to be divided into two or more new schemes of the same kind under specified circumstances.
12.In response to a member, the Assistant Director/Scheme Operations (AD/SO) confirmed that the costs incurred in winding up a registered scheme would be borne by the applicant concerned (eg. by the employer, trustee or the MPFA) and scheme members accrued benefits would not be affected by the costs of winding up the scheme.
Proposed sections 38 to 40
13. Members noted that the proposed amendments to sections 38 to 40 were largely technical in nature and sought to improve on textual clarity.
Proposed section 42
14. Elaborating on proposed section 42 which specified the circumstances in which the MPFA would be able to disclose information to specified public officers and to other public authorities, SM/OI clarified that it might be necessary for the future MPFA to exchange information with the Securities and Futures Commission on the conduct and performance of approved trustees or investment managers registered with the Commission. SM/OI also confirmed that there were similar provisions in the Occupational Retirement Schemes Ordinance.
15. Members were concerned about the statutory duty or otherwise of the MPFA in disclosing information to other public authorities, notably the Inland Revenue Department and the possible jeopardy of the privacy of scheme members personal data. In response, SALD advised that the MPFA had discretionary powers under proposed section 42(2) in deciding whether or not to disclose certain information to the Commissioner of Inland Revenue (CIR) upon request. SALA supplemented that the MPFAs discretion in disclosing information to the CIR was also subject to the principles stated in proposed section 42(1)(d).
| 16. In this respect, AD/SO advised that the MPFAs information on scheme members were mainly statistical data in a summary form. The MPFA would not have information on individual scheme members except when being notified by the trustee in cases of default contributions. At members request, the Administration would review the proposed provisions and check whether the proposed provision would be compatible with provisions in the Personal Data (Privacy) Ordinance.
Proposed section 42A
17. Members noted that proposed section 42A provided that an auditor or service provider appointed by an approved trustee would not be in breach of confidentiality owed to the trustee if the breach related to the disclosure of certain information to the MPFA in discharging the "whistle-blowing" duties.
Proposed sections 43B and 43C
| 18. Members noted that the Administration would move a Committee stage amendment (CSA) to delete "subsection (8) excepted" from proposed section 43B(1).
19.In reply to a member, SM/OI confirmed that the maximum fine applicable to offences in the MPFSO was at level 6, i.e. $100,000. SALD supplemented that an employer defaulting contribution committed an offence irrespective of the amount involved. However, in awarding the level of fine upon conviction, the court would take into account relevant factors including the amount of default contribution and the number of employees involved in the case.
| 20. The Administration would move a CSA to add a paragraph (c) to proposed section 43C(1) to the effect that a self-employed person who had failed to pay mandatory contribution committed an offence.
Proposed section 45
| 21. The Administration would move a CSA to substitute reference to "subsection (3)(a)" with "section 45A(1)(a)" in proposed section 45(2).
Proposed section 45A(2) and (3)
| 22. Members noted that the Administration would move a CSA to delete proposed section 45A(3) in order to empower the Administration to prescribe provisions under regulations the non-compliance with which could be subject to financial penalty or punishable as an offence.
23. In reply to a member, the Administration clarified that the monetary amounts specified in proposed section 45A(2) were the maximum levels of financial penalty which could be prescribed by subsidiary legislation. Proposed section 43B(4) however provided for a criminal sanction to be decided by the court and hence, only the maximum level of fine was specified.
Proposed sections 46 and 47
24. The Administration explained that the proposed section 46 would extend the regulation-making powers of the Chief Executive in Council while certain matters that were covered by existing section 47 on "Rules" would be transferred to proposed section 46.
Proposed Schedules 2 and 3
25. Members noted that proposed Schedules 2 and 3 clarified the existing Schedules and extend their operation to casual employees who were members of industry schemes.
| 26. As pointed out by the Deputy Chairman, the character " " should be added before "$240,000" when referring to the maximum level of relevant income per year in the Chinese version of proposed Schedule 3. The Administration would introduce the necessary CSA.
II Any other business
27. In response to the Chairman, the Director/MPF Office (D/MPFO) suggested that the Bills Committee should first complete its deliberation on all policy and legal issues arising from proposed amendments to the MPFSO, to be followed by scrutiny of proposed amendments to 11 other Ordinances which were primarily consequential amendments to facilitate implementation of the MPF system. Thereafter, the Bills Committee could proceed to examine the draft subsidiary legislation. D/MPFO explained that the proposed sequence in examining the Bill and draft subsidiary legislation was to allow time for the MPFO to consult and co-ordinate with other Government Departments in case further revisions were required on the proposed amendments to the other Ordinances in question. Members agreed.
28. The Chairman reminded members that the next meeting of the Bills Committee would be held on 8 December 1997 at 2:30 pm.
29. The meeting ended at 4:30 pm.
Provisional Legislative Council Secretariat
24 December 1997