Draft prudential standards and practice guides released
by APRA for consultation provide considerable detail on APRA's
plan to supplant new legislation mandating minimum numbers of
As we previously reported, all boards of RSE licensees,
including employer-sponsored superannuation funds, will be required
to have a minimum one-third independent directors and an
independent chair on the board under draft legislation proposed by
the Federal Government.
Release of the consultation materials by APRA follow the
Government's own consultation earlier this year.
Significantly, as a result of that consultation, the independence
requirements in the draft legislation will no longer apply from 1
July 2016 – they will commence (with a transitional period)
when the Act receives royal assent. In a similar vein, APRA expects
its prudential standards and prudential practice guides to commence
immediately upon their registration.
Accordingly, understanding the changes proposed in draft
prudential standard SPS 510 Governance and SPS 512
Governance Transition is crucial for industry. We have
extracted the key components of each instrument
SPS 510 Governance
SPS 510 will be aligned with equivalent provisions applying to
authorised deposit taking institutions and insurers under
Prudential Standard CPS 510 Governance.
APRA will require RSE licensees to put in place a formal
governance framework, which must include a formal policy regarding
board size and composition and nomination, appointment and removal
At least one third of the members of both the Board Audit
Committee and Board Remuneration Committee must be independent
The chair of both the Board Audit Committee and Board
Remuneration Committee must be an independent director. The
chair of the Board cannot also act as the chair of the Audit
The Board's independence is to be assessed annually.
SPG 510 Governance
Expands on existing guidance relating to board renewal, and
provides guidance related to the nomination, appointment and
removal of directors.
Considerations for RSE licensees seeking to appoint new
directors, including their independence and fit and proper
SPS 512 Governance Transition
That all RSE licensees undertake a preliminary assessment of
the extent to which their governance arrangements comply with the
new governance requirements.
To notify APRA whether the RSE licensee complies, intends to
comply or intends to cease operating by the end of the transition
To develop a transition plan to address the key changes
required to the RSE licensee's governance and risk management
frameworks to ensure compliance by the end of the transition
SPG 512 Governance Transition
SPG 512 expands on the types of actions that a transitioning
RSE licensee may need to undertake in order to comply with the new
governance requirements by the end of the transition period,
including some examples of the types of impediments that an RSE
licensee may face.
The timing for compliance with SPS 510 Governance is
explained in SPS 512 Governance Transition as follows:
Date of registration: New governance
requirements commence in SPS 510 and SPS 512.
1 July 2016: RSE licensees to complete
1 January 2017: Transition or exit plan (as
applicable) to be submitted to APRA.
Royal Assent + 3 years: All RSE licensee
boards must comply with the new governance requirements or have
exited the industry.
Subject to passage of the draft legislation and consideration of
any submissions received, APRA intends to finalise the prudential
standards and prudential practice guides before the end of 2015.
Consultation closes on 23 October 2015, with APRA's
consultation package comprising the following documents:
This newsletter includes links to recent documents relating to superannuation, funds management & financial services.
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