Mandatory Provident Fund (MPF)

SFC investigation over company governance was ‘painful’, Exco head says

Executive Council convener Bernard Charnwut Chan urges MPF providers to

go the extra mile to avoid scrutiny

PUBLISHED : Tuesday, 17 October, 2017, 5:01pm
UPDATED : Tuesday, 17 October, 2017, 10:51pm

Executive Council convener Bernard Charnwut Chan urged all Mandatory Provident Fund operators to improve their governance standards, warning that his own experience showed it was better to go the extra mile than draw the scrutiny of regulators.

Chan, who co-founded Bank Consortium Trust, an MPF provider, said he hoped improvements in governance by the 14 MPF providers would help make a positive change.

“I share a personal experience with you all about the pain of facing the investigation of a regulator on a company associated with me. That dragged on so many years and it was definitely a pain,” Chan said in a speech on Tuesday to hundreds of pension professionals at a governance workshop arranged by Mandatory Provident Fund Schemes Authority.

SFC imposes five-year cold-shoulder

In 2002 Asia Financial Asset Management (AFAM) was reprimanded by the Securities and Futures Commission. The now defunct asset management firm was 70.29 per cent owned by Asia Financial Holdings, of which Chan is a president.

The SFC takeover panel publicly reprimanded AFAM for a lack of internal controls and management failure that led to a breach of the takeover code.

“Its management and conduct fell far short of that which the panel would expect of a registered investment management company,” the SFC statement said in a statement at the time.

Fifteen years after the SFC action, Chan on Tuesday said he remembered the experience.

Bernard Chan stays clear of cold shoulder

“Although I was never reprimanded by the regulator, I however would still need to declare in my CV to the regulator that one of my associated companies has been reprimanded by the SFC,” Chan said, without identifying the company.

“It is important for all of us to take governance seriously. Any management mistakes of your staff may lead to an investigation by the regulator. The impact is also very long lasting,” he said.

Chan supported the MPFA’s move to introduce a range of measures next year to improve the governance of MPF providers, including a proposal to require two independent directors, instead of the current requirement for only one.

US$100bn MPF’s performance falls under the spotlight as governing authority proposes raft of new measures to improve returns

“It has been a trend for regulators to require more independent directors on company boards. The insurance sector also requires there should be two independent directors,” Chan said.

The MPF oversees HK$780 billion (US$100 billion) in pension assets in Hong Kong.

Since launch in 2000, the compulsory retirement scheme has faced criticism for high fees and low returns, Chan said.

“The MPF, as well as the Link Reit, have become the two public enemies in Hong Kong as they face criticism all the time,” Chan said.