ENG-1996 — Page 117

FINANCIAL AND MONETARY AFFAIRS

Bureau, which provides an independent avenue for resolving claim disputes arising from personal insurance policies.

Enabling legislation came into force in June 1995 to support the self-regulatory system, under which no person is permitted to act as an insurance intermediary unless he is a registered insurance agent or an authorised insurance broker. Insurance companies are required by law to comply with the Code of Practice for the Administration of Insurance Agents in registering and controlling their agents. An insurance broker must satisfy certain minimum requirements before he can be authorised. The purpose of the self-regulatory system is to enhance the professionalism of the industry which in turn will benefit Hong Kong as a developing international insurance centre.

The Occupational Retirement Schemes Ordinance provides a registration system for voluntarily established occupational retirement schemes. The Commissioner of Insurance, as Registrar of Occupational Retirement Schemes, is responsible for the regulation of private sector retirement schemes. The objective of the ordinance is to provide greater certainty that retirement scheme benefits promised to employees will be paid when they fall due. The ordinance requires all schemes operating in or from Hong Kong to be either registered with, or exempted by, the Registrar.

All registered schemes must meet certain basic requirements, including asset separation (the assets of a scheme must be kept separate and distinct from the assets of the employer or the scheme administrator); independent trusteeship (there should be at least one independent trustee who must not be the employer, his employee or his associate); restricted investments (any loan to the employer of the scheme or his associate out of the scheme's assets is prohibited, as is any excessive investment in the business undertaking of the employer); funding (the assets of the scheme must be sufficient to meet its aggregate vested and past service liabilities and the scheme shall be funded in accordance with the terms of the scheme); independent audit; actuarial reviews (for defined benefit schemes); and the submission of annual financial statements to the Registrar. There are also requirements for disclosure of information regarding the operation of the scheme to its members.

By the end of 1996, 14 923 schemes covering a total of more than 830 000 employees were registered, and 1 859 schemes were exempted.

Mandatory Provident Fund Schemes

After the enactment of the Mandatory Provident Fund Schemes Ordinance in August 1995, the government began to prepare the subsidiary legislation necessary for bringing the ordinance into effect. It provides the framework for a privately managed mandatory provident fund (MPF) system that will cover members of the workforce aged 18 and above. It will provide for joint contributions by the employer and employee, each contributing 5 per cent of the employee's income to a registered trust scheme managed by approved MPF trustees. The accrued benefits will be fully vested in the scheme members and can be transferred from scheme to scheme when employees change or cease employment. A self-employed person will have to contribute 5 per cent of his income. Benefits must be preserved until retirement.

In February 1996, the Mandatory Provident Fund Office was set up under the Financial Services Branch with the special responsibility for developing the draft subsidiary legislation. The government has also established a formal advisory

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