Industry bristles at prospect of fines after regulator warns of investment breaches
Hong Kong's fund industry is seeking legal advice as it gears up to fight the possibility of punitive action from the pension regulator over breaches of investment regulations.
Sources have told the South China Morning Post that the Mandatory Provident Fund Schemes Authority (MPFA) recently told most of the 20 MPF providers they might have breached regulations by investing in Dutch depositary receipts, also known as Dutch certs.
The products are traded on the Netherlands' stock exchange in a format similar to American depositary receipts.
Under MPF investment regulations, MPF providers can invest members' money in American depositary receipts but not Dutch certs. However, many MPF funds investing in European markets have exposure to Dutch certs as it is a common way for investors to trade Dutch blue chips such as ING Group.
Savings under MPF, a compulsory retirement savings scheme covering more than two million Hong Kong workers, are subject to tight regulation. The regulator's concerns follow debate locally and around the world about what type of products fund managers controlling pension savings should be allowed to invest in.
Senior executives of MPF providers who have traded Dutch certs say MPFA officials have informed them the product is not on the list of authorised investment vehicles.
