APRA intends to further strengthen its independence requirements for RSE licensees, following new guidance issued by the regulator last week. As we have previously reported, APRA is consulting with industry about significant amendments to SPS 510 Governance and a new prudential standard, SPS 512 Governance Transition with a view to these changes taking effect from 1 July 2016.
APRA’s proposed changes will further strengthen governance requirements for RSE licensees, with APRA now proposing to require that RSE licensees:
- establish a policy to determine the materiality threshold for when a director has, or has had, a “material business relationship” with the RSE licensee. This policy will then be applied to determine the independence of current or potential directors; and
- where a director or executive officer of a large employer sponsor is appointed as an independent director, to assess whether changes to the number of employees of a large employee sponsor affect that director’s independence.
APRA’s guidance has also clarified industry concern that existing RSE directors can be reclassified as independent directors (provided, of course, that director meets the independence requirements) and that, for entities who decide to cease operating rather than comply with the new independence requirements, that APRA may, on a case by case basis, extend that entity’s time to cease operating by the end of the transition period.
Consultation on APRA’s governance reforms closes 23 October 2015.