APRA DRAFT PRUDENTIAL STANDARDS FOR SUPERANNUATION – WHAT DO THEY MEAN FOR YOUR RSE?
APRA PS
APRA’s key requirements1
Key differences to the
Discussion Paper?2
Transitional
application?
Impact for your RSE
Draft SPS 114 –
Operational
Risk Financial
Requirements
This prudential standard will require
RSE Licensees to maintain adequate
financial resources to address losses
arising from operational risks that may
affect business operations. The
operational risk financial requirement
(ORFR) is the target amount of financial
resources that the RSE licensee
determines is necessary to respond to
these losses.
An RSE Licensee must:
 This prudential standard
generally reflects the
principles outlined in the
Discussion Paper, however,
APRA would have the
power to extend the three
year transition period.
Yes – 3 years
with a power
for APRA to
extend if
justified by an
RSE
Licensee.
 The board of the RSE Licensee is
ultimately responsible for ensuring that
all requirements are met, including
ensuring that the RSE Licensee holds
and has access to financial resources in
the form of an operational risk reserve,
operational risk trustee capital (or a
combination) to meet the ORFR.
 Have a documented strategy that
sets out the RSE Licensee’s
approach to determining,
implementing, managing and
maintaining the ORFR.
 Have suitable policies and
procedures to manage the financial
resources held to meet the ORFR.
 Determine the tolerance limit below
the ORFR that, if financial resources
held to meet the ORFR were to
breach this limit, would require the
RSE licensee to notify APRA and
implement a replenishment plan.
 APRA flags guidance on
how insurance can be used
to mitigate risks.
 Conditional relaxation of
prohibition on the use of
ORFR for administration
deficiencies not identified by
the RSE Licensee as an
operational risk.
 APRA’s expectation of an ORFR target
amount of “at least .25 per cent of funds
under management” does not appear in
the prudential standard and RSE
Licensees will need to plan for more than
.25% to accommodate non-operational
risks.
 Risk management framework is critical
as the amount of ORFR will be in inverse
proportion to amount of residual risk.
 Consider potential for risk mitigation
through insurance, due diligence of
service providers and employer
covenants for DB funds.
 Ensure the RSE Licensee has
monitoring systems and ongoing
compliance arrangements.
 Ensure that financial resources held
to meet the ORFR are only used for
1
This column replicates the “Objectives and key requirements of this Prudential Standard” section in each draft APRA prudential standard dated April 2012.
This column is a comparison of APRA’s Response to Submissions paper of April 2012 and the draft prudential standards of April 2012 with APRA’s Discussion Paper “Prudential Standards for
Superannuation” of September 2011.
2
1
APRA PS
APRA’s key requirements1
Key differences to the
Discussion Paper?2
Transitional
application?
losses arising from operational risk.
Impact for your RSE
Read with:
 Proposed covenants in s52(2) (e) and (f)
of the SIS Act to act fairly in dealing with
beneficiaries of and within a class.
 SPS 220 – Risk Management.
 Prudential Practice Guide 200 – Risk
Management.
 Prudential Practice Guide 110 – Capital.
 Proposed guidance on use of insurance
policies to mitigate risks, impact of
employer covenants on ORFR for
defined benefit funds, reliance of due
diligence on service providers to mitigate
risk and use of the ORFR.
 APRA’s refinement of the conglomerate
proposals contained in Discussion
Paper: Supervision of Conglomerate
Groups in the context of their application
to RSE licensees.
Draft SPS 160 –
Defined benefit
matters
This prudential standard establishes the
requirements for an RSE Licensee of a
defined benefit fund to manage the fund
in such a way that the RSE Licensee
will be able, out of the assets of the
fund, to meet liabilities of the fund as
and when they become due.
The requirements in the prudential
standard also apply to defined benefit
sub-funds.
 In September 2011, APRA
proposed to focus on
funding and solvency.
However, the prudential
standard covers funding to
the vested benefits level,
treatment of sub-funds and
self insurance only.
No
 Ensure ongoing compliance with the
prudential standard including actuarial
and auditing requirements.
Read with:

SPS 250 – Insurance in
Superannuation.

Part 9 of the SIS Regulations.

Modification Declaration 23.
2
APRA PS
APRA’s key requirements1
Key differences to the
Discussion Paper?2
Transitional
application?
Impact for your RSE
 This prudential standard
generally reflects the
principles outlined in the
Discussion Paper.
No, but note
the earlier
application of
proposed risk
covenant in
the SIS Act.
 RSE Licensees will need to adapt their
current risk management framework to
the new requirements.
An RSE Licensee must:
 Arrange for the undertaking of, and
reporting on, regular actuarial
investigations into the financial
position of a defined benefit fund.
 Arrange for an interim actuarial
investigation in circumstances
where the financial position of a
defined benefit fund deteriorates
below a shortfall limit set by the RSE
Licensee.
 Implement a program to restore a
defined benefit fund to a satisfactory
financial position, so that the vested
benefits of beneficiaries are fully
funded, and submit the program to,
and report to, APRA.
 If the fund is permitted to self-insure
benefits, arrange for regular
actuarial oversight, attest annually
that the self insurance continues to
be in the best interests of
beneficiaries, and develop a
contingency plan for an orderly wind
up of the self insurance
arrangements.
Draft SPS 220 –
Risk
Management
This prudential standard establishes
requirements for an RSE Licensee to
have systems for identifying, assessing,
managing, mitigating and monitoring
material risks that may affect its ability
to meet its obligations to beneficiaries.
 Stronger Super reforms create new risks
(both financial and non-financial) that will
3
APRA PS
APRA’s key requirements1
These systems together with the
structure, policies, processes and
people supporting them, comprise an
RSE Licensee’s risk management
framework.
The risk management framework must
also be aligned with the RSE
Licensee’s business plan.
An RSE Licensee must:
 Have a written business plan that
sets out the high level strategic
direction of the RSE Licensee’s
approach to managing its business
operations.
 Maintain a board approved risk
appetite statement.
 Maintain a board approved risk
management strategy that describes
the key elements of the risk
management framework that give
effect to the RSE Licensee’s
strategy for managing risk.
 Have a designated risk
management function responsible
for assisting in the development,
implementation and maintenance of
the risk management framework.
 Ensure that the risk management
framework is subject to effective and
comprehensive review at least every
3 years and subject to a regular
compliance audit.
Key differences to the
Discussion Paper?2
Transitional
application?
Impact for your RSE
require identification.
 Licensees should consider new risks
from other related reforms (FoFA, 2012
Budget and FATCA).
 There is a strong link between this
standard and the Operational Risk
Financial Requirements standard (see
above).
 The better the risk management
framework, the less residual risk and
therefore the less ORFR required. There
is a substantial, financial value-add from
strong risk management, due diligence
of service providers, fit and proper
assessments.
 Timing – the requirement for a risk
management strategy under new
s52(8)(a) will apply from the effective
date of the legislation, but SPS 220 will
only apply from 1/7/13.
 Timing – a Licensee’s risk management
framework will need to be well advanced
in time for its MySuper application.
 Risk management appetite is a new and
individualised concept that will require
close consideration from RSE
Licensees.
 Licensees should consider creating a
designated risk management function
within their business if they do not
already have one.
4
APRA PS
APRA’s key requirements1
Key differences to the
Discussion Paper?2
Transitional
application?
 Notify APRA when the RSE
Licensee becomes aware of a
significant breach of, or material
deviation from, the risk management
framework or discovers that the risk
management framework does not
adequately address a material risk.
Impact for your RSE
Read with:
 Section 52(8)(a) of the SIS Act.
 SPS 114 – Operational Risk Financial
Requirements.
 MySuper authorisation application.
 Prudential Practice Guide SPG 200 –
Risk Management.
 Submit a risk management
declaration on an annual basis.
 Prudential Practice Guide SPG 233
Pandemic Planning and Risk
Management.
 Maintain adequate technical, human
and financial resources at a level
that is adequate for the RSE
Licensee’s business operations.
 Prudential Practice Guide SPG 234 –
Management of Security Risk in
Information and Information Technology.
 Proposed guidance on types of risks
envisaged, consideration of systemic
risks and risk appetite including
consideration of risk appetites for
different risk types, coverage of low
frequency, high impact events and how
different risks interact.
Draft SPS 231 –
Outsourcing
This prudential standard aims to ensure
that all outsourcing arrangements
involving material business activities
entered into by an RSE Licensee are
subject to appropriate due diligence,
approval and ongoing monitoring.
All risks arising from outsourcing
material business activities must be
appropriately managed to ensure that
the RSE Licensee is able to meet its
 This prudential standard
generally reflects the
principles outlined in the
Discussion Paper.
 The Discussion Paper did
not, however, articulate the
requirement to consult with
APRA prior to entering into
any offshoring agreement
involving a material
Yes
 Review and assess existing contracts to
determine materiality.
 Set up a contracts register.
 Consider your process for assessing
potential contracts and whether they fall
within the prudential standard.
 Consider implications of the transitional
period.
5
APRA PS
APRA’s key requirements1
obligations to its beneficiaries.
An RSE Licensee must:
Key differences to the
Discussion Paper?2
Transitional
application?
business activity.
Impact for your RSE
Read with:
 Prudential Practice Guide 200 – Risk
Management.
 Have a policy, approved by the
board, relating to outsourcing of
material business activities.
 Cross Industry Circular No 1 – Custodian
Requirements.
 Have sufficient monitoring
processes in place to manage the
outsourcing of the RSE’s material
business activities.
 SPS 232 – Business Continuity
Management.
 SPS 114 – ORFR
 Have a legally binding agreement is
in place for all outsourcing of
material business activities.
 SPS 220 – Risk Management
 Consult with APRA prior to entering
into agreements to outsource
material business activities to
service providers that conduct their
activities outside Australia.
 SPS 520 – Fit and Proper
 SPS 310 – Audit & related matters
 SPS 510 – Governance
 SPS 521 – Conflicts of Interest
 Notify APRA after entering into
agreements to outsource material
business activities.
Draft SPS 232 –
Business
Continuity
Management
This prudential standard aims to ensure
that each RSE Licensee implements a
whole of business approach to
business continuity management,
appropriate to the size, business mix
and complexity of an RSE Licensee’s
business operations. Further, that
business continuity management
increases resilience to business
disruption arising from internal and
external events and may reduce the
impact of a business disruption on the
 This prudential standard
generally reflects the
principles outlined in the
Discussion Paper.
Yes
 Review or draft, (as appropriate), a
Business Continuity Management (BCM)
Policy.
 Review existing contracts - do all
contracts require the provider to confirm
they have an appropriate BCP?
 Review existing BCP for compliance with
prudential standard (and the BCM) or
draft new BCP that reflects
organisational capacity of the RSE.
 Consider implications of transitional
6
APRA PS
APRA’s key requirements1
Key differences to the
Discussion Paper?2
Transitional
application?
Impact for your RSE
period.
business operations of an RSE
Licensee.
An RSE Licensee must:
Read with:
 SPS 231-Outsourcing.
 Identify, assess and manage
potential business continuity risks to
ensure that it is able to protect the
interests, and meet the reasonable
expectations, of beneficiaries and
protect the financial position of the
RSE Licensee, any of its RSEs or
connected entities.
 Prudential Practice Guide 200 – Risk
Management.
 Prudential Practice Guide 233 –
Pandemic Planning and Risk
Management.
 Prudential Practice Guide 234 –
Management of Security Risk in
Information and Information Technology.
 Consider business continuity risks
and controls as part of its overall risk
management framework and
approve a Business Continuity
Management Policy.
 Develop and maintain a business
continuity plan that documents
procedures and information which
enables the RSE Licensee to
manage business disruptions.
 Review the business continuity plan
annually and periodically arrange for
its review by the internal audit
function or an appropriate external
expert.
 Notify APRA in the event of certain
disruptions.
Draft SPS 250 –
Insurance in
Superannuation
This prudential standard establishes
requirements for an RSE Licensee with
respect to the offering of insured
benefits to, and the acquisition of
 This prudential standard
largely reflects the
principles outlined in the
Yes
Develop and implement an insurance
management framework (or amend the
existing one) which includes as a minimum:
7
APRA PS
APRA’s key requirements1
insurance for the benefit of
beneficiaries.
Key requirements include:
 The requirement for the RSE
Licensee to have an insurance
management framework.
 What the insurance management
framework must include.
 The requirement to document the
insurance strategy.
 The requirements for selecting an
insurer and due diligence of
selected insurers.
 The requirements for the insurance
policy or policies and any related
agreements.
 Monitoring requirements for the
relationship with the insurer.
Key differences to the
Discussion Paper?2
Discussion Paper.
 The Discussion Paper did
not envisage RSE
Licensees being required to
maintain detailed
information about the
beneficiaries in its RSEs
and its claims experience
as well as data about the
sums insured and
premiums paid.
 The Discussion Paper did
not foreshadow the
transitional application of
the prudential standard to
insurance policies and
related agreements entered
into prior to the registration
of the prudential standard
on the Federal Register of
Legislative Instruments
(expected to be December
2012).
Transitional
application?
Impact for your RSE
 The insurance strategy required by
section 52(7) of the SIS Act.
 The required inclusions in its insurance
policies covering the RSE’s members for
the permitted insurance products death, total and permanent disablement,
partial disablement and terminal illness.
 A policy for administering the election by
a member to opt out of the benefits
provided by the RSE Licensee.
 Policies to ensure that all staff who are
employed in the insurance activities of
the RSE are fully aware of the
framework.
Develop and implement a policy for insurer
selection and monitoring which includes the
selection process (including conducting a
due diligence review, analysis of the
prospective insurer’s terms and conditions
and premiums), appropriate allocation of
resources to manage and monitor the RSE
Licensee’s relationship with the insurer and
the insurer’s performance.
Review administration systems to ensure
that they can accurately record:
 The data that RSE Licensees are
required to retain for 5 years under the
standard.
 Elections by members to opt out of
benefits provided by the RSE Licensee.
8
APRA PS
APRA’s key requirements1
Key differences to the
Discussion Paper?2
Transitional
application?
Impact for your RSE
Review insurance policies and offerings
now to:
 Ensure that they address the
requirements of the prudential standard
and where they do not, take steps to
renegotiate them.
 Identify the expiry of contracts in relation
to non permitted insurance products to
enable them to be phased out under a
process and timeframe to be agreed with
APRA.
Read with:
 Section 52(7) of the SIS Act.
Draft SPS 310 –
Audit & related
matters
This prudential standard establishes
requirements for the provision to the
Board and senior management of an
RSE Licensee of independent advice in
relation to the operations, financial
position and risk controls of the
business operations of the RSE
Licensee. This advice is designed to
assist the Board and senior
management in carrying out their
responsibilities for the sound and
prudent management of the business
operations of the RSE Licensee.
The prudential standard outlines the
roles and responsibilities of the
approved auditor of an RSE Licensee.
It also outlines the obligations of an
RSE Licensee to make arrangements
 The requirements relating to
internal audit have been
moved to SPS 510 –
Governance.
No
 RSE Licensees will need to appoint an
auditor in accordance with the prudential
standards, confirming that fitness and
propriety standard is met.
 Ensure the auditor provides reports as
required by prudential standard.
 Consider any new auditor terms of
engagement carefully.
 Prepare for APRA and auditors finding
their way with the intersection between
SPS 310 and Australian Auditing
Standards.
 The content of auditor reports for both
Annual return forms and the prudential
audit are not provided in the Draft SPS.
They are to be completed after
consultation in mid 2012.
9
APRA PS
APRA’s key requirements1
Key differences to the
Discussion Paper?2
Transitional
application?
to enable its approved auditor to fulfil
his or her responsibilities.
An RSE Licensee must:
Impact for your RSE
Read with:
 SPS 520 – Fit and Proper.
 SPS 510 – Governance.
 Make arrangements to enable its
approved auditor to undertake his or
her role and responsibilities.
 SPS 231 – Outsourcing.
 Prudential Practice Guide 100 – Capital.
 Submit to APRA all reports required
to be prepared by an auditor under
this prudential standard.
 Prudential Practice Guide 200 – Risk
Management.
The approved auditor:
 Auditor reports for both annual return
forms and the prudential audit to be
released.
 Prudential Practice Guide 520 – Fitness
and Propriety.
 Must audit the financial statements
and certain APRA annual return
forms in relation to each RSE.
 Must review other aspects of that
RSE and provide a report to the
RSE Licensee. The audit and review
must cover the RSE Licensee’s
business operations in respect of
the RSE.
 May also be required to undertake
special purpose engagements.
Draft SPS 510 –
Governance
APRA states that it is essential that an
RSE Licensee has a sound governance
framework and conducts its affairs with
a high degree of integrity. A culture that
promotes good governance benefits all
stakeholders of an RSE Licensee and
helps to maintain public confidence in
the entity.
APRA states that SPS-510 sets out
 Removal of the requirement
that board assessment be
“objective” and
“independent”, which raised
concerns that external
reviews were to be
mandated.
 Clarification of meaning of
“non-executive director” in
No
 Review board delegations and
mechanisms for monitoring the exercise
of delegations.
 Ensure there is a mechanism for the
board to be satisfied of skills of directors
and senior management.
 Consider ensuring the board has access
to external consultants and advisers to
10
APRA PS
APRA’s key requirements1
minimum foundations for good
governance of an RSE Licensee’s
business operations. It aims to ensure
that an RSE Licensee’s business
operations are managed soundly and
prudently by a competent board, which
can make reasonable and impartial
business judgments in the best
interests of beneficiaries.
APRA considers that governance of an
RSE Licensee builds on these
foundations in ways that take account
of the size, business mix and
complexity of the RSE Licensee’s
business operations.
Key requirements include:
 That the board must have a policy
on board renewal and procedures
for assessing board performance.
 That the RSE Licensee must have a
Remuneration Policy that aligns
remuneration with risk management.
 That a Board Remuneration
Committee must be established.
 That a Board Audit Committee must
be established.
 That an RSE Licensee must have a
dedicated internal audit function.
 Independence requirements for
auditors consistent with those in the
Corporations Act.
Key differences to the
Discussion Paper?2
relation to membership of
Audit and Remuneration
Committees.
 RSE Licensees can apply
for relief from the
Committee requirements if,
for example, a
Remuneration Committee is
not required because of the
nature of their remuneration
structure, or if the board has
neither independent nor
non-executive directors.
 The Chair of any board
committee on prudential
matters must be a director.
 Remuneration policy will
only cover remuneration
received in relation to a
person’s role with the fund
regardless of the source.
 Internal audit moved to this
SPS from SPS-310. It can
be outsourced without
APRA’s approval, but SPS231 outsourcing applies and
selection of the provider is
the responsibility of the
Board Audit Committee.
RSE Licensee can apply for
an exemption from or
modification of the internal
audit requirement. Scope of
Transitional
application?
Impact for your RSE
supplement its skills and knowledge.
 Board performance assessment – can
senior management carry out an
effective assessment?
 SPS-510 requires a certain level of detail
in the board renewal policy requirement
to deal with how the board will remain
open to new ideas and independent
thinking while retaining expertise.
 Remuneration policy – review now to
identify who it covers (including service
providers) and to ensure it encourages
behaviour to support stated goals. Don’t
wait until disclosure time to identify
issues.
 Internal audit – RSE Licensees will need
to revise the scope of internal audit and
the appointment process if it uses an
external service provider.
 Existing whistleblowing laws are
effectively expanded to include former
officers and employees and contractors
of RSE Licensee. RSE Licensees will
need to reconsider employment
contracts and service contracts to
consider strategies to protect itself.
Read with:
 SPS 520 – Fit and Proper.
 SPS 310 – Audit and Related Matters.
 SPS 231 – Outsourcing.
 SPS 220 – Risk Management.
11
APRA PS
APRA’s key requirements1
Key differences to the
Discussion Paper?2
Transitional
application?
Impact for your RSE
 Prudential Practice Guide 200 – Risk
Management.
internal audit narrowed.
 Prudential Practice Guide 230 –
Adequacy of Resources.
 Prudential Practice Guide 520 – Fitness
and Propriety.
 Proposed PPG 520 – regarding the
standard of independence for directors
and the chair.
 Proposed PPG 520 – regarding
remuneration policy.
Draft SPS 520 –
Fit and proper
APRA states that persons who are
responsible for the management and
oversight of an RSE Licensee’s
business operations need to have
appropriate skills, experience and
knowledge, and act with honesty and
integrity. These skills and qualities
strengthen the protection afforded to
beneficiaries and other stakeholders.
To this end, RSE Licensees need to
prudently manage the risk that persons
in positions of responsibility might not
be fit and proper.
This prudential standard establishes
minimum requirements for RSE
Licensees in determining the fitness
and propriety of individuals to hold
positions of responsibility.
Key requirements include that:
 An RSE Licensee must have and
 The Discussion Paper
covered the proposed
requirements to require the
RSE Licensee to undertake
an annual assessment of
the fitness and propriety of
all responsible persons and
a separate assessment of
the collective skill required
to effectively govern the
RSEs under trusteeship and
criteria for auditors and
actuaries.
No
 Ensure the RSE Licensee has a Fit and
Proper Policy that meets the
requirements of the prudential standard.
 Determine assessment and monitoring
processes for fit and proper persons,
including where deemed not to be fit and
proper.
 “Responsible person” captures
considerably more people than
“responsible officer”, so RSE Licensees
should allow time for identification and
assessment / re-assessment.
 The requirement to assess
collective skill has not been
included in the APRA PS
draft.
 A review of the Australian Standard on
Employment Screening would assist in
developing the Fit and Proper Policy.
Read with:
 Additional provisions
concerning whistleblowing
have been included.
 SPS 510 – Governance.
 SPS 521 – Conflicts of Interest.
 Proposed new definitions to be inserted
12
APRA PS
APRA’s key requirements1
implement a Fit and Proper Policy
that meets the requirements of this
prudential standard.
 The fitness and propriety of a
responsible person must generally
be assessed prior to initial
appointment and then re-assessed
annually.
Key differences to the
Discussion Paper?2
Transitional
application?
 APRA acknowledges the
value of third party
attestations of fitness and
propriety but note RSE
Licensee must be satisfied
of relevant matters.
Impact for your RSE
into the SIS Act – senior manager,
actuary and approved auditor.
 Proposed new sections126H (6) and
130D (5) of the SIS Act.
 Proposed new covenants in section
52(2) (b) and 52A (2) (b) (care, skill and
diligence as a prudent superannuation
trustee).
 An RSE Licensee must take all
prudent steps to ensure that a
person is not appointed to, or does
not continue to hold, a responsible
person position for which they are
not fit and proper.
 Regulation 4.14 of the SIS Regulations.
 Prudential Practice Guide 520 – Fitness
and Propriety.
 Additional requirements must be
met for approved auditors and
certain actuaries.
 Certain information must be
provided to APRA regarding
responsible persons and the RSE
Licensee’s assessment of their
fitness and propriety.
Draft SPS 521 –
Conflicts of
interest
This prudential standard establishes
requirements for the identification,
avoidance and management of conflicts
of duty and interest. These
requirements are essential to ensure
that an RSE Licensee and its
responsible persons meet legislative
obligations in Part 6 of the SIS Act.
The conflicts management framework
must be approved by the board.
 This prudential standard
generally reflects the
principles outlined in the
Discussion Paper.
 There are no express
statements about the use of
related service providers
but there is also no
apparent change of
No
 Conflicts framework and policy must be
applied to the RSE Licensee, directors
and “responsible person(s)” as broadly
defined in SPS 520 – Fit and Proper.
The latter will require significant changes
to current frameworks and policies.
 The standard is directed at creating a
cultural change of conflict identification
and management throughout the
13
APRA PS
APRA’s key requirements1
An RSE Licensee must:
Key differences to the
Discussion Paper?2
Transitional
application?
position.
Impact for your RSE
business.
 Develop, implement and review a
conflicts management policy that is
approved by the board.
 The maintenance and disclosure of
register of material interest could create
stakeholder management issues.
 Identify all relevant duties and
relevant interests.
 There will be considerable ongoing
management and reporting obligations.
 Develop and publicly disclose
register of relevant duties and
relevant interests.
 Training will be required across business
operations to ensure cultural change.
 The RSE Licensee will need to consider
conflicts arising from related services
providers.
Read with:
 Proposed general covenants in s52 and
s52A of the SIS Act.
 SPS 520 – Fit and Proper.
 Prudential Practice Guide 520 – Fitness
and Propriety.
 Proposed guidance on conflicts
management including materiality
thresholds.
 ASIC RG181 Managing Conflicts of
Interest.
Draft SPS 530 –
Investment
governance
This prudential standard establishes
requirements for an RSE Licensee to
implement a sound investment
governance framework and to manage
investments to protect the interests,
and meet the reasonable expectations,
of beneficiaries.
Further, this investment governance
 Fees, costs and valuation
independence and timing
requirements and
performance fees are
omitted from SPS 530
because of their inclusion in
the Act.
 Requirement to articulate
No
 RSE Licensees face the challenge of
articulating, monitoring and maintaining
investment objectives and benchmarks.
 RSE Licensees should note that these
obligations apply to both MySuper and
choice products.
 Timing – many critical aspects will be
dealt with in forthcoming guidance,
14
APRA PS
APRA’s key requirements1
framework must include the investment
strategies for the whole of each RSE
and for each investment option, as
required by the SIS Act.
An RSE Licensee must:
 Formulate specific and measureable
investment objectives for each
investment option, including return
and risk objectives.
 Develop appropriate measures to
monitor the performance of
investments on an ongoing basis.
 Review the investment objectives
and investment strategies on a
periodic basis.
 Formulate a liquidity management
plan.
Key differences to the
Discussion Paper?2
an investment philosophy
has been removed as it is
acknowledged it would have
little additional benefit.
Transitional
application?
Impact for your RSE
which means the RSE Licensee may
need to make informed decisions prior to
guidance based on advice and
consultation with their APRA supervisor.
 RSE Licensees will likely need to
develop more formal responsibility and
reporting structures, and incorporate
external investment functions into these
structures.
 RSE Licensees will need to consider the
application of Outsourcing and Fit and
Proper standards to external investment
managers and determine how many
levels of investment managers need to
be considered.
 RSE Licensees may find it challenging to
deal with different rules (e.g. fees) in
MySuper and Choice products.
 Alternative asset classes will present
challenges in both valuation and the
monitoring of performance.
 RSE Licensees will likely need to make
substantive changes to terms of
engagement of service providers
including asset consultants, fund
managers and custodians.
 Fund Managers may need to make
changes to their products and to their
reporting functions to accommodate the
requirements of RSE Licensees.
Read with:
 New investment covenants, in particular
15
APRA PS
APRA’s key requirements1
Key differences to the
Discussion Paper?2
Transitional
application?
Impact for your RSE
s52(6)(c) to ensure investment options
allow adequate diversification.
 SPS 231 – Outsourcing.
 Prudential Practice Guide 200 – Risk
Management.
 Prudential Practice Guide 520 – Fitness
and Propriety.
 “Standard risk measure guidance paper
for trustees” July 2011, Financial
Services Council and ASFA.
 Proposed APRA guidance on fees, costs
and valuation requirements in the Act
and also performance fees.
16