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Duty of care

           A fund committee is selected by fund members to manage their provident fund for their best interest. Therefore, the fund committee must select an asset management company with a good operating system and effective staffs to manage the fund. Moreover, another important responsibility is to set an investment policy. However, in practice, they may encounter some problems such as 
           - Lack of guidelines that could lead the fund committee to choose an asset management company. The fund committee may choose an asset management company only because of its lower management fee and ignore the quality of its services.
           - Identify an investment policy that is not suitable for member's preference and/or appropriate level of risk.
           - Fail to notice whether the asset management company exercises the voting right as a shareholder of the companies the fund has invested in.

Practice
           It is also necessary for the fund committees to have a guidelines manual telling what areas they should pay attention to when overseeing a provident fund.
  1. Selecting an asset management company: You must realize that the heart of managing a provident fund is investment. Thus, when selecting an asset management company or reviewing the contract with the current one, you must make sure that the company is stable, and has an effective and reliable investment system to operate your fund.
  2. Setting an investment policy: Normally, members have different backgrounds and needs. It is difficult to set one investment policy that meets all members’ needs. Therefore, you should give importance to the majority when making a decision. Diversification is also important in order to minimize risk and maximize return which would benefit fund members. Moreover, an appropriate benchmark must be set in accordance with your investment policy when evaluating fund performance.
  3. Selecting an auditor: It is the fund committee’s responsibility to select and appoint an auditor. First of all, you should check whether he/she is a qualified auditor. For a fund with 100 members or less, you may appoint any auditor possessing a Certified Public Accountant (CPA) certificate. However, for a fund with more than 100 members, you can only appoint an auditor from the SEC list.
  4. Proxy voting: A shareholder of a company can delegate his/her voting right to another shareholder in his/her absence. Via the asset management company, the fund committee is informed of issues for consideration at the company's annual general meeting (AGM). Fund committee, as the fund’s representative, may act as its proxy. The fund committee; thus, should set guidelines for proxy voting and vote your proxy ballots in accordance with your values and what you believe will improve the company's bottom line. Alternatively, you can authorize the asset management company to vote in place of the fund.
  5. Disclosure: Members have the right to know all information of the fund. Your frequent communication with members will also boost up their confidence. Furthermore, fund committees should disclose sufficient information to members whenever the decision involving the fund's operation is needed by setting guidelines that contain topics, details, frequency, and communication channels.
  6. Record keeping: You should keep the fund's records in a safe and easy-to-access form. These records are memorandums for the fund committee meetings, payment bills, members’ information, investment records, and governing rules modification documents. In addition, the record must be shown whenever members or authorities make a request.
last updated date 09/06/2553

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