Governance Requirements: APRA Letter to RSE’s

On 26 June 2015, APRA provided correspondence to superannuation trustees alerting them to the Government’s proposed changes to the governance requirements for RSE licensees.  Changes proposed involve minimum independence requirements, effective from 1 July 2016, for trustee boards, which must put in place at least one third minimum independent directors, and an independent chair, following a three year transition period.

To support the proposed amendments APRA will amend Prudential Standard SPS 510 (to reflect the independent director requirements) and introduce a new Prudential Standard SPS 512 ‘Governance Transition.’

The definition of independent director and material relationship will be set out in the proposed amendments, with APRA including some of the circumstances which APRA will constitute a material relationship.  APRA proposes to include material professional advisers, consultants or suppliers as examples of material relationships.

In addition to changes to trustee boards, APRA will also require a majority of the Board Audit Committee and Board Remuneration Committee to comprise of independent directors, including an independent chair.

APRA will require trustee boards to include a revised process for board renewal which addresses provisions which relate to the process by which directors are nominated for board positions. The framework must also assess suitability of candidates for appointment, with regular on-going assessments of independence by trustee boards, as circumstances might change over time.

APRA will have an executive over-riding power to determine whether someone meets the definition of independent.

More generally APRA intends to issue guidance on:

  • the size of RSE licensee boards;
  • renewal and appointment process;
  • setting director tenure limits;
  • management of conflicts, particularly where multiple directorships are held; and
  • the role of board committees, i.e. remuneration & risk committees

During the transition period, RSE licensees will be expected to ensure ongoing effectiveness and functionality while its membership is adjusted during the transition period. Trustees will need to implement a transition plan to support the functioning of the board during the transition period which must be approved by the trustee board no later than 1 July 2016.

The APRA letter to trustees is available on the APRA website.

 

 

 

 

 

 

 

Comments are closed.