LegCo Subcommittee on MPF System
Information Note
Report on Outstanding Issues -
Approval of Trustees

Purpose

This paper presents a summary of the comments raised by Members on issues relating to approval of trustees in the Subcommittee meetings held on 21 November 1996 and 9 December 1996, together with the response and follow-up actions to be taken by the Administration.

Specific Issues Raised

LegCo’s Comments

2. Members requested the Administration to :

  1. consider issuing guidelines on the specific qualifications/ experience and the "fit and proper" criteria of trustees;
  2. review the adequacy of the amount of minimum paid-up capital required of an applicant trust company in future years when the MPF trust business grow larger in size;
  3. collect the necessary information on current qualified trustees, investment managers and custodians and their relationship, as well as paid-up capital, if available; and
  4. collect information on ORSO schemes with respect to independence of trustee, custodian and investment manager.

Administration’s Response and Action

I. Guidance notes on the "fit and proper" criteria

3. We will issue guidance notes on the specific qualifications/experience and the "fit and proper" criteria of trustees. To provide Members some indications on the factors to be considered for fit and properness, a sample of the "fit and proper" portion of the draft application form required to be completed by each of the directors of the trust company is provided at Annex A.

II. Capital adequacy of trustees

4. The current proposed minimum paid-up capital of HK$30 million has been set in accordance with overseas countries’ experience and in consultation with the trustee industry. We consider that the proposed level will be adequate at the early stage of the implementation of the MPF system and it will be subject to on-going review as the MPF assets grow in size.

III. Survey on trustees

5. At Member’s request, we have conducted a survey to collect some background information about the paid-up capital, net assets value and corporate relationship with associated investment management companies with respect to trust companies in Hong Kong.

6. According to the information provided by the ORSO Office, there are 35 companies that are either local registered trust companies or offshore trust companies actively involved in retirement schemes business in Hong Kong. We have invited all of them to participate in this survey. Out of the 35 companies, 3 of them did not respond, 2 of them are dormant companies and 2 of them are unable to provide the information. Therefore, the following survey results are based on 28 companies.

  1. Out of the 28 respondents, 23 of them are registered trust companies (RTCs) in Hong Kong and 5 of them are offshore trust companies. Most RTCs (17 out of the 23) have the minimum required paid-up capital of HK$3 million for registration under the Trustee Ordinance. However, none of them currently satisfies the proposed capital and net assets requirements of HK$30 million on MPF approved trustees. A summary of the survey result on capital and net assets are provided under Table 1 of Annex B.
  2. The survey also reveals that the majority of the trust companies (25 out of the 28) are subsidiaries of large financial institutions such as banks and insurance companies. A summary of these parent companies’ capital and net assets are provided under Table 2 of Annex B.
  3. 22 out of the 28 trust companies have an investment management company within their corporate groups.

IV. Information on ORSO schemes

7. Currently, 96% of the ORSO schemes are participated in pooled retirement funds which are authorised under the Securities and Futures Commission (SFC). According to the information provided by the SFC, there are currently 51 authorised pooled retirement funds in Hong Kong. Excluding those 22 funds which are under insurance arrangements, there are 29 funds which are governed by trust. Out of these trust funds, half of them have connection between trustee and the promoter or investment manager of the fund, i.e. they belong to the same corporate group.

Mandatory Provident Fund Office
Financial Services Branch
17 April 1997

Annex A

Form A.1

PARTICULARS REQUIRED IN RESPECT OF DIRECTORS OF A CORPORATE TRUSTEE TO BE VETTED BY THE MPF AUTHORITY.

Name of corporate trustee :

PART I

Director includes any person occupying the position of director by whatever name called.

PART II

(EACH EXISTING OR PROPOSED DIRECTOR SHOULD SUBMIT THE FOLLOWING PARTICULARS TO THE MPF AUTHORITY FOR VETTING AS DIRECTOR OF AN MPF CORPORATE TRUSTEE).

(1) Full name, residential address, date of birth, occupation, (effective or proposed) date of appointment, education and professional qualifications.

PART III

(EACH EXISTING OR PROPOSED DIRECTOR SHOULD CERTIFY, SIGN AND DATE PART III, OR OTHERWISE INDICATE WHICH OF THE FOLLOWING ITEMS THEY DO NOT SATISFY).

  1. I am over age 21.
  2. I have never been found to be of poor reputation or character, or lacking in financial integrity, reliability or honesty, in Hong Kong or elsewhere.
  3. I have never been : -
    1. found by a court or competent authority to have acted fraudulently or dishonestly.
    2. convicted of a criminal offense or have been the subject of unresolved criminal charges.
    3. censured or reprimanded by, or disqualified from or denied membership of, a professional or trade body; or a regulatory license, registration or similar approval has been refused or revoked.
    4. disqualified by a court of competent jurisdiction from being a director of a corporation.
    5. censured or reprimanded by a professional or regulatory body for negligence, incompetence or mismanagement.
    6. dismissed or requested to resign from any position or office for negligence, incompetence or mismanagement.
    7. a substantial shareholder in, or involved in the management of, a corporation that was wound up (otherwise than by a solvent members’ voluntary dissolution) or was otherwise insolvent or had a receiver or administrator appointed, however described (extent of the previous involvement is relevant).
    8. a substantial shareholder in, or involved in the management of, a corporation which was found guilty of fraud (extent of the previous involvement is relevant).
    9. a substantial shareholder in, or involved in the management of, a trustee business which has committed a breach of trust or failed in its fiduciary duties as a trustee (extent of the previous involvement is relevant).
    10. a substantial shareholder in, or involved in the management of, a corporation which has been found to have committed acts described in (a) and (b) above.
  4. I am not an undischarged bankrupt, currently subject to bankruptcy proceedings or a bankrupt who has recently (last 7 years) been discharged.
  5. I have never failed to meet any judgment debt.
  6. I have an understanding of :
    1. the general structure of the regulatory framework that would apply to my activities if my application was successful.
    2. the particular legislative provisions and rules that apply to the functions that I would perform if approved.
    3. all obligations imposed by those provisions and rules.
    4. the fiduciary obligations and the general obligations owed to scheme members.

I certify that the above information is complete and correct to the best of my knowledge and I certify that the above particulars have been supplied by the above named applicant.

Signature :

Date :

Annex B

Table 1(a) Registered Trust Companies

Size of Capital/

Net Assets

(HK$million) (M)

Capital

No. of Companies

Net Assets

No. of Companies

Less than 3M

0

5

3M

17

2

3M to 10M

4

12

over 10M

2

4

Total

23

23

Average size of capital : $4.2 million

Average size of net assets : $6.4 million

Table 1(b) Offshore Trust Companies

Size of Capital/

Net Assets

(HK$million) (M)

Capital

No. of Companies

Net Assets

No. of Companies

Less than 5M

2

2

5M to 10M

2

0

Over 10M

1

3

Total

5

5

Average size of capital : $17.2 million

Average size of net assets : $92.8 million

Table 2 Parent Company

Size of Capital/

Net Assets

(HK$million) (M)

Capital

No. of Companies

Net Assets

No. of Companies

Not Available

4

4

Less than 150M

3

2

150M to 1,000M

10

2

1,000M to 10,000M

4

10

10,000M to 50,000M

7

3

Over 50,000M

-

7

Total

28

28

Average size of capital : $8,522 million

Average size of net assets : $45,352 million

Last Udpated on {{PUBLISH AUTO[[DATE("d mmm, yyyy")]]}}