Hong Kong Regulations

MANDATORY PROVIDENT FUND SCHEMES (GENERAL) REGULATION - SECT 65

Approved trustee to ensure that scheme assets are not improperly encumbered

Caution: This is a past version. See the current version here.

(1) The approved trustee of a registered scheme must ensure that the scheme
assets are not subject to any encumbrance, other than an encumbrance to which
this subsection does not apply.

(2) Subsection (1) does not apply to an encumbrance that-

   (a)  is created for the purpose of securing an amount borrowed to enable
        accrued benefits to be paid to or in respect of scheme members, and
        then only if-

        (i)    the amount borrowed (together with any other borrowings made
               for the same purpose) does not exceed 10 per cent of the
               market value of the scheme assets at the time of the borrowing;
               and

        (ii)   the borrowing is not part of a series of borrowings; and

        (iii)  at the time the borrowing was made, it was unlikely that the
               period of the borrowing would exceed 90 days; or (L.N. 222 of
               2000; L.N. 223 of 2000)

   (b)  is created for the purpose of securing an amount borrowed to settle a
        transaction relating to the acquisition of scheme assets, and then
        only if-

        (i)    the amount borrowed (together with any other borrowings made
               for the same purpose) does not exceed 10 per cent of the
               market value of the scheme assets at the time of the borrowing;
               and

        (ii)   the borrowing is not part of a series of borrowings; and

        (iii)  at the time the borrowing was made, it was unlikely that the
               period of the borrowing would exceed 7 working days; and (L.N.
               222 of 2000; L.N. 223 of 2000)

        (iv)   at the time the decision to enter into the transaction was
               made, it was unlikely that the borrowing would be necessary; or
               (L.N. 222 of 2000; L.N. 223 of 2000)

   (c)  is created for the purpose of securing a claim of payment for the safe
        custody or administration of the scheme assets by a central 
        securities depository or a delegate of a custodian; or (L.N. 222 of
        2000; L.N. 223 of 2000)

   (d)  is created for the purpose of acquiring a financial futures  contract
        pursuant to section 14 of Schedule 1 or a currency forward  contract
        pursuant to section 15 of Schedule 1; or (L.N. 222 of 2000; L.N. 223
        of 2000)

   (e)  is created by the operation of law in Hong Kong or in a place outside
        Hong Kong. (L.N. 222 of 2000; L.N. 223 of 2000)

(3) Any encumbrance created over scheme assets of a registered scheme is void
to the extent that it is inconsistent with subsection (2).

(4) For the avoidance of doubt, it is hereby declared that any encumbrance
created over the scheme assets of a registered scheme that is, at the time of
creation, consistent with the exception under subsection

(2) shall remain valid throughout the period for which the borrowing concerned
remains outstanding. (L.N. 222 of 2000; L.N. 223 of 2000)