AIST does not support the proposed governance changes to superannuation funds outlined in the exposure draft legislation(Superannuation Legislation Amendment (Governance) Bill 2015 and its supporting Regulations), explanatory guideand APRA’s letter, all circulated for consultation on 26 June 2015.
The explanatory guide sets out the matters to be addressed by APRA to support the implementation of the proposed legislation, and the exposure draft legislation provides APRA with extensive new powers. APRA’s role in supporting the proposed reformswill includechanges to the Prudential Standardsand the ability to make determinations on a person’s independence, or lack thereof.
AIST has made a submission1to the Treasury on the proposed reforms, submitted on 23 July 2015. This submissionmakes further comments with regard to the proposals outlined in the APRA letter and the proposed APRA powersset out in the exposure draft legislation.
AIST supports principles-based regulation around the governance arrangements of superannuation funds, as flexibility is necessary in an industry that has distinctly different sectors with significantly different structures and stakeholder interests.
AIST has long been a supporter of high governance standardsin the industry and we are committed to working with Government and APRA to achieve best practice outcomes.
We do not, however, believe that structural changes to board composition, in the form ofmandatingone-third independent directors,achievesthat aim.
AIST makes the following recommendations:
- That the key terms of the definition of ‘independent’ should be defined in the legislation, and not in APRA Standards
- That the term ‘material relationship’ should relate to the nature of the relationship, not the mere existence of a relationship that may not be material
- That APRA not be granted the power to make determinations on an individual’s independence, or lack thereof, but rather, give guidance to RSE licensees where it is requested or required
- That the mandatory composition of audit and remuneration committees be revisited, and that there be no requirement for a majority independent directors on those committees where there is no financial conflict
- That further guidance on the appointment and removal of directors be outlined in SPG 510, but that any changes to SPS 510 recognise the rights and powers of sponsoring organisations