Hong Kong Regulations

MANDATORY PROVIDENT FUND SCHEMES (GENERAL) REGULATION - SECT 68

Eligibility for appointment as custodian

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

PART VI

FUNCTIONS OF SERVICE PROVIDERS

Division 1-

Custodians of scheme assets

(1) A person is eligible to be a custodian of scheme assets only if the person
is one of the following-

   (a)  an authorized financial institution;

   (b)  a registered trust company incorporated in Hong Kong that has a paid
        up share capital of not less than $150000000 and net assets of not
        less than the same amount;

   (c)  a registered trust company incorporated in Hong Kong that complies
        with subsection (2).

(2) A registered trust company complies with this subsection if it-

   (a)  has a paid up share capital of not less than $50000000 and net  assets
        of not less than the same amount; and

   (b)  is an associate of either-

        (i)    a company that complies with subsection (3) and provides
               continuous financial support to the registered trust company;
               or

        (ii)   a company having a subsidiary that complies with subsection

(3) and provides continuous financial support to the registered trust 
company.

(3) A company complies with this subsection if it is-

   (a)  an authorized financial institution; or

   (b)  a registered trust company incorporated in Hong Kong that has a paid
        up share capital of not less than $150000000 and net assets of not
        less than the same amount; or

   (c)  an authorized insurer that has a paid up share capital of not less
        than $150000000 and net assets of not less than the same amount; or

   (d)  an approved overseas bank, an approved overseas insurer or an
        approved overseas trust company that complies with subsection (4).

(4) An approved overseas bank, an approved overseas insurer or an
approved overseas trust company complies with this subsection if-

   (a)  it has a paid up capital of at least US$200000000 or an amount in
        another foreign currency equivalent to that amount; and

   (b)  it satisfies a minimum credit rating set by the Authority, based on
        the credit rating as determined by an approved credit rating  agency.

(5) A company or a subsidiary of a company provides continuous 
financial support to a registered trust company for the purposes of subsection
(2)(b)(i) and (ii) if it gives the Authority a written undertaking, acceptable
to the Authority, that it-

   (a)  will, if so required by the Authority, subscribe sufficient additional
        capital of not more than $50000000 when the paid up share capital or
        net assets of the trust company become less than that amount; and

   (b)  will not, without the approval of the Authority, do any act to dispose
        of or issue, or authorize the disposal or issue of, any part of the
        share capital or assets of the trust company as a result of which the
        trust company ceases to be its associate.

(6) A person is not eligible to be a custodian of scheme assets unless the
person has a sufficient presence and control in Hong Kong.

(7) Subsection (6) does not apply to a person who is a subcustodian of
the scheme assets kept outside Hong Kong if those assets were acquired outside
Hong Kong.

(8) A person has a sufficient presence and control in Hong Kong if-

   (a)  the person complies with subsection (9); and

   (b)  the person has sufficient expertise and management resources in Hong
        Kong to conduct its business operations effectively; and

   (c)  the Hong Kong chief executive officer of the person ordinarily resides
        in Hong Kong. (32 of 2000 s. 48)

(9) A person complies with this subsection if-

   (a)  the person's day-to-day business activities relating to the person's
        business in Hong Kong (including the keeping of its records relating
        to those activities) are conducted wholly in Hong Kong; or

   (b)  in the case where those activities are not conducted wholly in Hong
        Kong-

        (i)    they are conducted under the person's supervision and control
               in Hong Kong; and

        (ii)   sufficient records of those activities are kept at a place or
               places so that those records can be readily accessible in Hong
               Kong to enable an audit of them to be carried out.

(10) A person is not eligible to be a custodian of scheme assets unless the
person and all delegates of the person are independent of each investment
manager appointed in respect of the scheme and of all delegates of the
investment manager.

(11) Nothing in this section requires the approved trustee of a registered
scheme to appoint a person to be a custodian of the scheme assets if the
trustee satisfies the eligibility requirements of this section.