Provisional Legislative Council

PLC Paper No. CB(1)900
(These minutes have been
seen by the Administration)

Ref : CB1/BC/3/97

Bills Committee on
Provident Fund Schemes
Legislation (Amendment) Bill 1997

Minutes of the meeting held on
Thursday, 8 January 1998, at 2:30 pm
in Chamber of the Legislative Council Building

Members present :

Hon Ronald ARCULLI, JP (Chairman)
Dr Hon LAW Cheung-kwok (Deputy Chairman)
Hon WONG Siu-yee
Hon HO Sai-chu, JP
Hon LEE Kai-ming
Hon Mrs Peggy LAM, JP
Hon CHAN Yuen-han
Hon CHAN Kam-lam
Hon Ambrose LAU Hon-chuen, JP
Hon NGAN Kam-chuen

Members absent :

Hon James TIEN Pei-chun, JP
Hon Henry WU
Hon MA Fung-kwok
Dr Hon Mrs TSO WONG Man-yin
Hon YEUNG Yiu-chung
Hon Paul CHENG Ming-fun, JP
Dr Hon TANG Siu-tong, JP
Hon CHOY So-yuk

Public officers attending :

Mrs Pamela TAN
Mandatory Provident Fund Office

Ms Maisie CHENG
Assistant Director
Scheme Operations

Mr Raymond TAM
Assistant Director
Regulatory Standards

Mr Duncan BERRY
Senior Assistant Law Draftsman
Department of Justice

Miss Shandy LIU
Government Counsel
Law Drafting Division
Department of Justice

Clerk in attendance:

Miss Polly YEUNG
Chief Assistant Secretary (1)3
Staff in attendance :

Miss Connie FUNG
Assistant Legal Adviser 3

Mr Daniel HUI
Senior Assistant Secretary (1)5

I. Confirmation of minutes

(PLC Paper No. CB(1)737)

The minutes of the meeting held on 11 December 1997 were confirmed.

II.Meeting with the Administration

Members continued the scrutiny of the draft Mandatory Provident Fund Schemes (General) Regulation (the draft Regulation) and deliberated on the following proposed sections.

Proposed section 50

3.In reply to a member’s enquiry on proposed section 50(1)(a), the Assistant Director/Scheme Operations (AD/SO) said that the three-month period was the maximum time frame allowed for an approved trustee to provide scheme members with a benefit statement after each financial period of a registered scheme. The trustees would be at liberty to provide a benefit statement more frequently or within a shorter period after each financial period.

4.Elucidating on proposed section 50(7), AD/SO advised that an approved trustee would be allowed to deliver a scheme member’s benefit statement to the member’s employer who would be required to give or send by post the benefit statement to the scheme member within seven days. Such an arrangement would provide greater flexibility to the trustee and would be more cost-effective.

Proposed section 51

5.Responding to the Chairman’s enquiry on the type of information to be provided by the approved trustee in answering scheme members’ enquiries under proposed section 51(3), AD/SO advised that the Administration’s policy was that the approved trustee should be able to answer enquiries related to information which it had issued. The Administration would re-examine whether the present drafting of the proposed section could reflect this policy intent.

Proposed section 52

6.On proposed section 52(1), members suggested that an approved trustee should be required to give prior notice to scheme members regarding any change in its business name, address or telephone number. In response, the Administration would consider amending the proposed section to provide that notification on changes in business particulars should be given by the approved trustee to scheme member before the changes took place.

Proposed section 53

In reply to a member, AD/SO confirmed that the portability and withdrawal of a scheme member’s accrued benefits attributable to voluntary contributions would be governed by the scheme rules of the MPF scheme concerned.

Proposed section 54

8.Members were concerned about provisions in proposed section 54(b) under which a majority decision of the trustees could be easily overruled by the independent trustee who was absent at a meeting of the trustees but who refused to endorse a majority decision reached at the meeting. In response, the Administration would consider modifying the requirement under the proposed section.

Proposed section 55

9.In response to the Chairman’s enquiry on the rationale of requiring an approved trustee to disclose "personal interests" instead of "interest" under proposed section 55, the Administration and the Assistant Legal Adviser 3 (ALA3) would examine whether the expression "personal interest" was appropriate in the context of proposed section 55 and whether a similar expression was used in other ordinances.

Proposed section 56

10.Members considered that the cancellation, expiry or termination of insurance and of performance guarantee taken out by an approved trustee would have a grave consequence on the scheme members’ interests and therefore the trustees concerned should not be allowed to report such cancellation, expiry or termination after their occurrence as currently required under proposed sections 56(1)(b), 56(2)(b)(iv) and 56(4)(b). As requested by members, the Administration would amend the provisions to require that such events be reported to the MPFA prior to their occurrence.

11.As regards a member’s suggestion that, upon receipt of a report from the trustee on cancellation, expiry or termination of insurance or of performance gurantee, the MPFA should transmit the information to scheme members, the Assistant Director/Regulatory Standards cautioned that whilst the MPFA would take necessary follow-up actions upon receipt of such a report, it might be counter productive to release such information to scheme members because it might cause unnecessary disturbance in the market.

Proposed section 57

12.As requested by the Chairman, the Administration would examine whether the present drafting of proposed section 57(7) would give rise to the situation that the trustee would invariably choose to terminate a service provider before conducting an investigation on or seeking rectification from the service provider which was suspected of failing to prudently perform its obligations.

Proposed section 59

13.The Deputy Chairman enquired about the information to be provided to a new scheme member upon joining a MPF scheme as required in proposed section 59. In reply, AD/SO advised that the approved trustee would be required to provide all essential information about the scheme in a succinct manner, including fees and charges payable under the scheme. In addition, information on investments of the scheme would be disclosed in the annual report of the scheme which would be made available to scheme members upon request.

Proposed section 61

14.At the Chairman’s suggestion, the Administration would substitute "trustee" with "approved trustee" in proposed sections 61(2) and (3) to rectify a drafting error.

Proposed section 62

15.Members considered that the borrowing of money by the approved trustee under proposed section 62(2)(b) for financing the acquisition of scheme assets should be subject to the restriction in proposed section 62(2)(a)(i), i.e. such borrowings should not exceed 10 per cent of the market value of the scheme assets at the time of the borrowing. In response, the Administration agreed to amend the provisions to give effect to members’ proposal. It also confirmed in reply to some members’ enquiries that the 10% threshold was in line with international practices and also found in the pension legislation of other countries.

III. Any other business

16.The Chairman said that the next meeting would be held at 4:30 pm on the same day.

17.The meeting ended at 4:00 pm.

Provisional Legislative Council Secretariat
9 February 1998