PLC Paper No. CB(1)1197Senior Assistant Secretary (1)5
(These minutes have been
seen by the Administration)
I. Meeting with the Administration
The Administrations response to concerns raised by members at the meeting on 16 December 1997
(PLC Paper No. CB(1)843(01))
1Members noted the information paper which set out the Administrations response to concerns raised by members at the meeting on 16 December 1997 and deliberated on the following proposed sections of the draft MPF Schemes (General) Regulation.
Proposed section 6(6)(a)
2 In response to members concern raised at an earlier meeting on how the amount of insurance cover should be apportioned among several MPF schemes of different assets, the Administration explained that it proposed to apportion the amount of insurance cover on a pro-rata basis in accordance with the size of scheme assets. The MPF Schemes Authority (MPFA) would issue guidelines to facilitate future compliance of the proposed requirement on insurance cover.
3 In reply to members, the Assistant Director/Regulatory Standards (AD/RS) advised that legal costs incurred as a result of the trustee being sued by a third party not owing to the trustees fraud, misfeasance or breach of trust could be covered by the indemnity insurance taken out by the trustee.
Proposed section 9(2)
4 As regards some members concern raised earlier on about the possibility of a wrong inference from the wordings of the proposed section that the capital adequacy requirement on corporate trustee was an aggregate of HK$300 million instead of HK$150 million as intended, AD/RS explained that the present drafting was in order and was intended to ensure that the approved trustee had the minimum paid up capital of HK$150 million and an equivalent amount of net assets. He added that the proposed wordings of the capital adequacy requirement were in line with similar provisions in other jurisdictions.
Proposed section 13
5 In reply to members, AD/RS confirmed that in order to ensure various eligibility requirements on corporate trustees being on-going requirements, all approved trustees would be required to make an annual declaration on their continued fulfilment of the requirements for approval as a trustee and on their continued compliance with all the conditions of approval.
The Administrations response to concerns raised by members at the meeting on 8 January 1998
(PLC Paper No. CB(1)843(02))
6 Members noted the Administrations information paper and deliberated on the following proposed sections of the draft MPF Schemes (General) Regulation.
Proposed section 48
7 Some members remained concerned about allowing custodians of MPF schemes to enter into securities lending agreements. AD/RS explained that the MPFA would ensure adequate safeguards by requiring sufficient margins on the value of the collateral security which would be marked to market on a daily basis. Moreover, only cash or short-term bonds issued by the Hong Kong Monetary Authority or the United States Treasury would be accepted as collateral security.
Proposed section 70
8 The Assistant Director/Scheme Operations (AD/SO) advised that the proposed requirements on maintenance of accounting records by approved trustees were in line with similar provisions in the Banking Ordinance, the Securities Ordinance and the Insurance Companies Ordinance which did not prescribe the form or the place in which records were to be kept.
Hong Kong Investment Funds Associations (HKIFA) comments on the Capital Preservation Product (CPP)
(PLC Paper No. CB(1)843(04))
9 Referring to a letter dated 21 January 1998 from the HKIFA, AD/RS said that the Association supported the proposal that trustees losses in administration fees could be carried forward and be recouped if investment returns were sufficiently high in future months.
10 Miss CHAN Yuen-han reiterated that the Democratic Alliance for Betterment of Hong Kong (DAB) would only support the proposal which would allow the carrying forward of the trustees losses in administration fee (i.e. proposal 3 as set out in the Administrations information paper on the CPP considered at the last meeting.) In this regard, she indicated support for the Administrations proposal that the losses in administration fees could be carried forward for 12 months from the month in which the loss was incurred.
11 Mr WONG Siu-yee maintained his view that the capital preservation product should be provided by the Government and not by MPF scheme operators in the private sector.
12 AD/RS said that parallel to the proposed carrying forward of trustees administration fees on CPP funds, some service providers also suggested that in order to increase investment returns, considerations should be given to extending the investment maturity period of CPP funds on bonds issued by the Hong Kong Monetary Authority (HKMA). In reply, Miss CHAN Yuen-han said that the DAB would not support relaxing the relevant investment restrictions as higher risks would be incurred. The Deputy Chairman indicated support for extending the maximum investment maturity period for CPP funds investing in bonds issued by the HKMA in order to increase investment return.
Hong Kong Investment Funds Associations comments on stock lending and repurchase agreement
(PLC Paper No. CB(1)843(05))
13 Referring to HKIFAs written comments on allowing MPF custodians to enter into stock lending and repurchase agreements, AD/RS advised that the Association supported the proposal on repurchase agreement which covered lending of bonds to borrowers. However, the Association would have no objection if the proposed provisions on stock lending were removed pending further studies on the impact of stock lending on the stability of local financial markets.
14 In reply to members, AD/RS confirmed that the MPF custodian would need to obtain approval from the investment manager of a MPF scheme before entering into a stock lending or repurchase agreement.
The Residual Provident Fund Scheme (RPFS) under existing section 23 of the MPF Schemes Ordinance
|15 Miss CHAN Yuen-han indicated that she might move CSAs to amend the RPFS-related provisions to the effect that free entry into the scheme would be allowed. In this connection, the Chairman cautioned that Miss CHANs proposed amendments might have a charging effect under the Rules of Procedure of the Provisional Legislative Council. At the Chairmans request, the Senior Assistant Legal Adviser (SALA) would advise at the next meeting on whether Miss CHANs proposal was in compliance with the relevant Rules of Procedures.
IIAny other business
16 The Chairman said that he would make a verbal report to the House Committee on 23 January 1998, at the same time advising Members of the resumption of Second Reading debate on the Bill on 25 February 1998 as proposed by the Administration. As agreed by members, he would also seek the House Committees endorsement for this Bills Committee to continue scrutiny of the related subsidiary legislation after passage of the Bill.
17 In this connection, the Chairman reminded members that the deadline for giving notice to move CSAs to the Bill was 16 February 1998.
|18 In reply to the Chairman, the Director/MPF Office (D/MPFO) confirmed that the Administration would prepare a paper assessing the impact of the recent market turmoil on retirement schemes for members consideration at the next meeting to be held on 12 February 1998. In addition, the Administration revised proposal on the reconstitution of the MPFA and the related CSAs would also be ready for members consideration at the next meeting.
19 Members agreed that the next meeting would be held on 12 February 1998.
20 The meeting ended at 10:30 am.
Provisional Legislative Council Secretariat
26 March 1998