Hong Kong Regulations

MANDATORY PROVIDENT FUND SCHEMES (GENERAL) REGULATION - SECT 52

Restrictions on lending of scheme securities

(1) The approved trustee of a registered scheme must ensure that no securities
held in respect of the scheme are lent (whether with or without consideration)
except in accordance with an agreement entered into by the custodian of
the scheme assets and the borrower of the securities.

(2) If the authority to enter into security lending agreements in respect of a
registered scheme is to be delegated to a custodian appointed in respect of
the scheme, that authority must be included in the custodial agreement entered
into with the custodian in accordance with section 50.

(3) The trustee must ensure that, in relation to each constituent  fund of
the scheme-

   (a)  a security lending agreement relating to securities held in respect of
        the fund is entered into only if the amount of the consideration
        (including the value of any collateral security) given for the
        securities exceeds the value of those securities; and

   (b)  no more than 10 per cent of the assets of the fund are the subject of
        security lending agreements at any one time; and

   (c)  no more than 50 per cent of securities of the same issue, or of the
        same kind, held in respect of the fund are the subject of security
        lending agreements at any one time.

(4) For the purposes of this section, a security lending agreement is an
agreement under which one party to the agreement agrees to lend a security to
another party to the agreement in consideration for the payment of a fee and a
collateral security.