The Mandatory Provident Fund Schemes Authority (MPFA) has recently amended the Code on MPF Investment Funds (Code) to reflect (i) illustration of principles for considering inclusion in permissible asset classes for investment by MPF funds; and (ii) updates or clarifications in view of the latest regulatory developments. The revised Code, which takes effect from 14 February 2025, contains some important and long-overdue updates as the last version was issued in December 1999. We summarise below the major changes.
A. Updated regulatory requirements
The MPFA has set out new requirements in the following areas, many of which relate to corresponding updates in the codes and guidance of the Securities and Futures Commission (SFC):
B. Permissible asset classes
Another update concerns the principles for inclusion of permissible asset classes. For MPF funds, permissible asset classes are set out under relevant regulations and guidelines by prescriptive terms. From time to time, industry bodies have lobbied for the inclusion of new assets classes which may adopt a more novel structure, or which may be considered useful for diversification, as the market continues to develop. The regulator has set out the principles that will be applied in considering whether such asset classes can become permissible:
Lastly, the MPFA cautioned that even if an asset class is considered permissible for MPF purposes, trustees remain responsible and accountable for supervising and monitoring investment managers to ensure sound judgments and investment decisions are made as to which specific investment products to invest in. This has reinforced the MPFA’s expectations that trustees shall remain ultimately responsible for the operation of MPF funds, and shall abide by the regulatory duty to supervise service providers they engage.
On a contractual level, trustees are advised to clearly delineate the responsibilities in the investment management agreement, and seek appropriate indemnifications, when they delegate investment management functions to investment managers.
For further information, please contact:
Ming Chiu Li, Partner, Deacons
mingchiu.li@deacons.com
