Provident fund, trustee punished for compliance breach

Jan 27, 2005

Bank Trust Consortium and its arm Asia Insurance receive reprimands and an executive is suspended in Hong Kong.

Hong Kong's Securities and Futures Commission has reprimanded both Bank Trust Consortium and its affiliate, Asia Insurance (Pension Fund), for compliance breaches in a guaranteed fund administered under the Occupational Retirement Schemes Ordinance (ORSO). The SFC has also suspended Asia Insurance's responsible officer, Wong Kok-Ho, for four weeks.

BCT is the trustee of the Bank Consortium Pooled Retirement Scheme, an authorized ORSO pooled retirement fund, and Asia Insurance manages this scheme's guaranteed portfolio. BCT is also among the biggest master trustees in terms of members under the Mandatory Provident Fund system, but no MPF funds were cited by the SFC in this case.

Ignoring investment restrictions, Asia Insurance invested in unauthorized securities and engaged in related-party transactions in 2002 without seeking BCT's approval. Asia Insurance also ignored other compliance issues, including possible conflicts of interest when entering certain related-party transactions and, despite the explicit requirement under the Fund Manager Code of Conduct, did not have a designated compliance officer. Asia Insurance has admitted the lack of such an officer contributed to the breaches. The SFC found Wong, Asia Insurance's director of compliance and supervision, directly responsible by the SFC for these breaches, but the authorities took the relatively lenient decision to suspend him for our weeks because no harm came to investors during the period in question.

Moreover, BCT didn't find out about the infringements until informed by the SFC, despite the fact that these unauthorized investments took place over a lengthy period. The regulator found that BCT's compliance checklist was incomplete, and left it solely to Asia Insurance to contact it, instead of initiating its own periodic monitoring. Although BCT has since improved its processes, the breaches have called into question its fitness and properness as a trustee charged with provident fund money, says the regulator.