In a letter to all RSE licensees, APRA has confirmed its proposed amendments to SPS 510 Governance and other prudential standards (on which we have previously reported) will not be progressed in the immediate future after the Government was unable to secure passage of theSuperannuation Legislation Amendment (Governance) Bill in the Senate.
While this appears to discount the possibility that APRA will “go it alone” and implement the governance reforms without Government action, APRA remains committed to the proposals and intends to formally reflect in the prudential framework its proposed governance changes “at the earliest opportunity”.
Significantly, APRA intends to proceed with the proposed amendments in SPS 510 Governance to require RSE licensees to establish a “governance framework” which must include:
- a formal charter that sets out the roles, responsibilities and objectives of the Board;
- the voting rights and procedures for the decisions of the Board;
- the Board’s policies on the size and composition of the Board and any Board committees, Board renewal and the nomination, appointment and removal of directors, including director tenure and maximum tenure periods;
- the RSE licensee’s policies and processes to manage risks relating to fitness and propriety of responsible persons and relating to the management of conflicts of interest; and
- a review process to ensure that the governance framework remains effective.
In addition, APRA will require the Board to establish and implement policies and processes for the nomination, appointment and removal of directors. These policies must specify:
- the length of the director’s term and the maximum tenure limit;
- how vacancies will be managed, including, where applicable, how the RSE licensee will comply with the vacancy requirements in Part 9 of the SIS Act;
- the process by which a candidate will be nominated for a vacant Board position;
- the factors that will be considered when assessing the suitability of a nominated candidate, including how the RSE licensee assesses the independence of the candidate where relevant and the Board’s process for determining which candidate, if any, is to be appointed;
- the process by which a director will be appointed to the Board;
- the factors that will determine when an existing director will be re-appointed, including whether the director has served on the Board for a period that could, or could reasonably be perceived to, materially interfere with their ability to act in the best interests of beneficiaries;
- the process by which the Board will resolve disputes about nominations, appointment, re-appointment or removal of directors;
- when and how a director will be removed from the Board; and
- the Board’s policy on voting rights and procedures in relation to nomination, appointment, reappointment and removal of a director.
Further detail about the governance framework and nomination, appointment and removal policies for RSE licensees will be provided in amendments to SPG 510 Governance.
RSEs should keep a close eye on future developments from APRA and the Government in this politically-charged area of reform.