Almost a year after releasing proposals for the reform of its governance requirements for RSE licensees, APRA has now issued final versions incorporating the new requirements.
Trustees will need to move quickly to meet the new requirements by 1 July 2017.
APRA's proposed changes to Prudential Standard SPS 510 Governance (SPS 510) and Prudential Practice Guide SPG 510 Governance (SPG 510) were released for consultation in late 2015 and submissions received were largely supportive of APRA's proposals. Not surprisingly therefore, there are few changes in the final versions to those originally proposed by APRA.
The key changes to SPS 510 and SPG 510 are designed to ensure RSE licensees have a governance framework which sets out policies and procedures to achieve appropriate skills, structure and composition of the Board and a suitable process for the nomination, appointment and removal of directors that support appropriate Board composition and renewal on an ongoing basis.
Revised SPS 510 requires RSE licensees to have in place policies that address at a minimum:
- a formal charter that sets out the roles, responsibilities and objectives of the Board;
- the Board's policy in relation to voting rights and procedures for the decisions of the Board;
- Board policies to address the process for nomination, appointment and removal of director and Board renewal;
- Board policies to address the size and composition of the Board and any Board committees;
- the process by which disputes about nominations, appointment and re-appointment or removal of directors will be managed;
- when and how a director can be removed from the Board; and
- the RSE licensee's policies and processes to manage risks relating to the fitness and propriety of responsible persons and the management of conflicts.
The Board will be responsible for implementing the policies and processes in relation to the nomination, appointment and removal of directors and must set defined terms and the maximum tenure limit for individual directors.
APRA expects a Board to establish a process to ensure that governance risks are properly and regularly evaluated and managed by the Board. Governance risks include, but are not limited to, risks associated with:
- accountability and transparency of decision-making processes;
- delegation of roles and responsibilities;
- remuneration arrangements;
- fitness and propriety; and
- the management of conflicts of interest.
Where an RSE licensee already has in place a policy that satisfies requirements set out in SPS 510, the RSE licensee may incorporate such policies by reference into the governance framework. This means that, the materials do not have to be duplicated for the purposes of complying with the requirements of SPS 510.
Final SPS 510 will take effect on 1 July 2017, however APRA expects RSE licensees to consider the guidance in SPG 510 immediately. Given an RSE licensee's framework will not only include their Board charter and policies but the trustee constitution as well, Boards will need to move quickly to start the consultation process with stakeholders, and also among the directors, to have their framework in pace by 1 July 2017.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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