{"id":"F2022L01492","name":"Superannuation (prudential standard) determination No. 2 of 2022","slug":"superannuation-prudential-standard-determination-no-2-of-2022","collection":"legislative_instrument","jurisdiction":"commonwealth","status":"in_force","isInForce":true,"actNumber":null,"makingDate":null,"administeringDepartment":null,"currentVersion":{"id":102873,"registerId":"commonwealth-F2022L01492-current","compilationNumber":null,"startDate":"2026-04-03","status":"InForce","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"Authority","sectionType":"division","heading":"Authority","content":"###   \nAuthority\n\n1.  This Prudential Standard is made under section 34C of the Superannuation Industry (Supervision) Act 1993 (SIS Act).","sortOrder":0},{"sectionNumber":"Application and commencement","sectionType":"division","heading":"Application and commencement","content":"### Application and commencement\n\n2. This Prudential Standard applies to all registrable superannuation entity (RSE) licensees (RSE licensees).[\\[1\\]](#_ftn1)\n\n3. This Prudential Standard commences on 1 January 2023.\n\nInterpretation\n\n4. Where this Prudential Standard provides for APRA to exercise a power or discretion, the power or discretion is to be exercised in writing.\n\nAdjustments and exclusions\n\n5. APRA may adjust or exclude a specific requirement in this Prudential Standard in relation to:\n\n(a) a particular RSE licensee of an RSE;\n\n(b) a particular connected entity of an RSE licensee of an RSE;\n\n(c) specified RSE licensees of RSEs; or\n\n(d) specified connected entities of RSE licensees of RSEs.","sortOrder":1},{"sectionNumber":"Previous exercise of discretion","sectionType":"division","heading":"Previous exercise of discretion","content":"### Previous exercise of discretion\n\n    6. An RSE licensee must contact APRA if it seeks to place reliance, for the purposes of complying with this Prudential Standard, on a previous exercise of discretion by APRA under a previous version of this Prudential Standard.\n\nThe role of the Board\n\n7. An RSE licensee is ultimately responsible for the sound and prudent management of the investments of each RSE within the RSE licensee’s business operations.[\\[2\\]](#_ftn2)\n\n8. The Board of an RSE licensee (the Board[\\[3\\]](#_ftn3)) must, for the RSE licensee’s business operations, at a minimum:\n\n(a) approve investment objectives for each investment option offered in each RSE;\n\n(b) approve an investment strategy, in respect of each RSE, that is consistent with the RSE licensee’s duties to beneficiaries, including those in section 52(6) and (13) (if applicable) of the SIS Act and the requirements in this Prudential Standard:\n\n(i) for the whole of that RSE; and\n\n(ii) in respect of each investment option offered in that RSE;\n\n(c) monitor and assess regularly whether the investment objectives are being met; and\n\n(d) take appropriate and timely action regarding information contained in reports to the Board on investment matters.","sortOrder":2},{"sectionNumber":"RSE licensees that are part of a group[4","sectionType":"division","heading":"RSE licensees that are part of a group[4]","content":"### RSE licensees that are part of a group[\\[4\\]](#_ftn4)\n\n9. Where an RSE licensee is part of a corporate group, and the RSE licensee utilises group policies or functions, the Board must approve the use of group policies and functions and must ensure that these policies and functions give appropriate regard to the RSE licensee’s business operations.\n\nInvestment governance framework\n\n10. An RSE licensee must at all times have an investment governance framework to manage investments to meet the RSE licensee’s obligations to beneficiaries.[\\[5\\]](#_ftn5)\n\n11. An investment governance framework is the totality of systems, structures, policies, processes and people to address the RSE licensee’s responsibilities with regard to investments of each RSE within the RSE licensee’s business operations. An RSE licensee’s responsibilities include generating returns to meet investment objectives while managing and monitoring all identified sources of investment risk.[\\[6\\]](#_ftn6)\n\n12. The Board is ultimately responsible for the establishment, implementation, oversight and maintenance of an RSE licensee’s investment governance framework.\n\n13. An RSE licensee’s investment governance framework must, at a minimum, include:\n\n(a) investment objectives for each investment option offered by the RSE licensee;\n\n(b) a methodology for determining investment reporting measures[\\[7\\]](#_ftn7);\n\n(c) the investment strategy for the whole of each RSE and for each investment option as required by section 52(6) of the SIS Act;\n\n(d) all Board policies relating to investment activities;\n\n(e) role statements that include the details of each role’s responsibilities and reporting structures for all roles related to investment activities;\n\n(f) structures, policies and processes relating to investment activities, including for investment performance and risk measurement, assessment, stress-testing, valuations and reporting to the Board and senior management; and\n\n(g) a review process to ensure that the investment governance framework remains effective.\n\n14. An RSE licensee’s investment governance framework must be appropriate to the size, business mix and complexity of the RSE licensee’s business operations.\n\n15. An RSE licensee must have procedures to ensure that all persons in roles related to investment activities of the RSE licensee are made aware of, and have processes and controls for monitoring compliance with, the RSE licensee’s investment governance framework.","sortOrder":3},{"sectionNumber":"Review of the investment governance fram","sectionType":"division","heading":"Review of the investment governance framework","content":"### Review of the investment governance framework\n\n16. An RSE licensee must ensure that the appropriateness, effectiveness and adequacy of its investment governance framework are subject to a comprehensive review by operationally independent, appropriately trained and competent persons at least every three years.\n\n17. The scope of the review of an RSE licensee’s investment governance framework must have regard to the size, business mix and complexity of the RSE licensee’s business operations, the extent of any change to those operations and any changes to the external environment in which the RSE licensee operates.\n\nInvestment objectives\n\n    18. An RSE licensee must, when formulating the investment strategy for each investment option, set investment objectives that are:\n\n(a) aligned with the size, business mix and complexity of the RSE from which the investment option is offered; and\n\n(b) specific and measurable and, at a minimum, include:\n\n(i) a return objective; and\n\n(ii) a risk objective.\n\n    Formulating the investment strategy\n\n19. When formulating each investment strategy for the whole of the RSE, and for each investment option, an RSE licensee must document how it has regard to each of the factors in section 52(6) of the SIS Act.\n\n20. An RSE licensee must, when determining an appropriate level of diversification for each investment strategy[\\[8\\]](#_ftn8):\n\n(a) identify the risk factors, and sources of return with which the risk factors are associated;\n\n(b) where the strategy includes multiple assets and/or asset classes, identify how sources of returns are expected to interact, the variability in these interactions and the impact of these interactions on the overall diversification of the strategy in different market conditions;\n\n(c) determine the target exposure to the risk factors in paragraph 20(a); and\n\n(d) determine the asset classes and/or individual assets that it will invest in to achieve the desired risk exposure and whether making, holding and realising investments in those asset classes and/or individual assets can be implemented in a manner consistent with the interests of, and the RSE licensee’s duties to, beneficiaries.\n\n    21. An RSE licensee must, at a minimum, determine for each investment strategy for an investment option that includes multiple assets and/or asset classes:[\\[9\\]](#_ftn9)\n\n(a) asset allocation targets and ranges that are appropriate to the investment objectives of the investment option;\n\n(b) the basis on which asset allocation targets and ranges would be changed; and\n\n(c) a policy to monitor and maintain the asset allocation within the determined ranges within a reasonable timeframe.\n\n    22. For the investment strategy of a MySuper product, an RSE licensee must also document, in addition to the requirements in paragraphs 19-21 inclusive, at a minimum, how the investment strategy:\n\n(a) is diversified over multiple risk factors and sources of return as required in the SIS Act;\n\n(b) complies with section 52(13) of the SIS Act; and\n\n(c) complies with the relevant fee rules for MySuper products and general fee rules in the SIS Act.[\\[10\\]](#_ftn10)\n\nGiving effect to the investment strategy\n\n    23. An RSE licensee must have processes and criteria for selecting each investment to give effect to the investment strategy (investment selection process) to ensure that effective due diligence that is commensurate with the nature and characteristics of the investment is undertaken prior to the selection of an investment for an investment option.[\\[11\\]](#_ftn11)\n    24. An RSE licensee’s investment selection process must enable the RSE licensee to ensure:\n\n(a) it has sufficient understanding and knowledge of the investment selected, including an assessment of any factors that could have a material impact on achieving the investment objectives of the investment option;\n\n(b) it has sufficient understanding of how the investment is expected to perform under the range of stress scenarios determined under paragraph 31; and\n\n(c) the investment is appropriate for the investment option.\n\nMonitoring investments\n\n    25. An RSE licensee must determine appropriate measures, for the purposes of monitoring performance on an ongoing basis, in respect of each MySuper product, each investment option and each investment within an investment option. These measures must include appropriate performance benchmarks and a methodology for setting performance benchmarks. These measures, other than performance benchmarks for each investment within an investment option, must be approved by the Board.\n    26. An RSE licensee must ensure that the performance of each investment option and each MySuper product is regularly reported to the Board and senior management. This reporting must include an assessment of the sources of out-performance and under-performance relative to appropriate performance benchmarks as determined by the RSE licensee under paragraph 25.\n    27. An RSE licensee must ensure that persons undertaking the assessment of performance, by applying and assessing the measures required in paragraph 25 are operationally independent from persons who are responsible for making the investment.\n\nReviewing the investment strategy\n\n    28. For each investment strategy, an RSE licensee must have a review policy that is approved by the Board and that, at a minimum, requires each investment strategy to be reviewed against its investment objectives on at least an annual basis. The policy must also include:\n\n(a) the triggers that will cause an interim review of the investment strategy in addition to the annual review;\n\n(b) the processes for reporting the results of each review to the Board; and\n\n(c) the criteria that will determine whether the investment strategy must be changed.\n\n    29. On receipt of the results of a review of an investment strategy undertaken in accordance with the review policy, the Board must ensure that any decision to amend the investment strategy is supported by sufficient justification and analysis.\n\nInvestment stress testing\n\n    30. An RSE licensee must have a comprehensive investment stress testing program that is approved by the Board and is integrated into an RSE licensee’s investment governance framework.\n    31. An RSE licensee must, at a minimum, determine appropriate adverse stress scenarios for the investment strategy of each option. These adverse stress scenarios must cover a range of factors that can create extraordinary losses or make the control of risk within accepted tolerance level in the investment strategy difficult.\n    32. An RSE licensee’s comprehensive investment stress testing program must provide for:\n\n(a) investment stress testing performed prior to the implementation of the investment strategy;\n\n(b) investment stress testing based on scenarios determined in paragraph 31 to confirm that each investment strategy, including the targets and ranges set under paragraph 20(c) and paragraph 21(a) remain appropriate on at least an annual basis; and\n\n(c) investment stress testing based on scenarios determined in paragraph 31, and other parameters deemed appropriate by the RSE licensee, to assess the performance of each investment option based on the actual asset allocation on at least an annual basis.\n\n    33. The comprehensive investment stress testing program must, at a minimum include:\n\n(a) clearly articulated stress testing objectives, methodology, assumptions, frequency (at least annually), and risk factors, including the rationale for the severity of the adverse stress scenarios as required in paragraph 31;\n\n(b) the roles and responsibilities of persons (both internal and external) involved in the design, implementation, review, reporting and oversight of investment stress testing, including the role of the Board, relevant Board committees and senior management;\n\n(c) investment stress testing output or metrics that demonstrate the performance of each investment option under the stress scenarios required in paragraph 31;\n\n(d) processes for the regular review of stress testing methodology and assumptions;\n\n(e) circumstances that might lead to ad hoc investment stress testing, including triggers to indicate when ad hoc investment stress testing would be undertaken; and\n\n(f) processes for ensuring that relevant and reliable data are used in investment stress testing.\n\n    34. An RSE licensee must ensure that the results of the comprehensive investment stress testing program are:\n\n(a) reviewed periodically by the Board, relevant Board committees, and senior management; and\n\n(b) reflected in the RSE licensee’s investment governance framework.\n\n    35. The Board must document the methodology for stress scenario selection and how the results of the comprehensive stress testing program have been used in decision-making.\n\nLiquidity and cash flow management\n\n    36. An RSE licensee must, at a minimum, have a liquidity management plan, approved by the Board, for each RSE within its business operations that:\n\n(a) covers each investment option in the RSE;\n\n(b) outlines the procedures determined by the RSE licensee for measuring and managing liquidity on an ongoing basis;\n\n(c) includes consideration of how the liquidity of investment options in an RSE can be managed in a range of stress scenarios;\n\n(d) identifies the circumstances the RSE licensee considers to be a significantly adverse liquidity outcome that requires action (liquidity event);\n\n(e) outlines what action the RSE licensee will take when a liquidity event occurs;\n\n(f) outlines the roles and responsibilities of persons involved in the management and oversight of liquidity risk, including the role of the Board, relevant Board committees and senior management; and\n\n(g) outlines information, including key metrics, that must be reported to the Board, relevant Board committees and senior management, to ensure adequate oversight of liquidity risk.\n\n    37. An RSE licensee must ensure that information, including key metrics referred to in paragraph 36(g) are periodically reviewed by the Board, relevant Board committees and senior management, to ensure that such information and key metrics remain suitable.\n    38. An RSE licensee must implement liquidity stress testing as part of the comprehensive investment stress testing program required in paragraph 31 and the RSE licensee’s liquidity management plan.","sortOrder":4},{"sectionNumber":"Valuation governance framework","sectionType":"division","heading":"Valuation governance framework","content":"### Valuation governance framework\n\n    39. An RSE licensee must have an adequate valuation governance framework, which consists of the structures, processes, procedures and controls necessary to identify and manage valuation risk of investments.\n    40. The valuation governance framework must include a Board-approved valuation policy which, at a minimum, outlines:\n\n(a) the roles and responsibilities of persons for the oversight and management of valuation processes and procedures, including the Board, relevant Board committees and senior management;\n\n(b) the key metrics and information that must be reported to the Board, relevant Board committees and senior management, and the frequency of that reporting;\n\n(c) the valuation methodology employed for each asset class (and sub-asset class and instrument/holding vehicle type where relevant), including the sources of valuation inputs;\n\n(d) the circumstances under which independent external valuations are to be obtained;\n\n(e) the frequency of valuation of investments having regard to the prevailing market, economic environment, member equity considerations and matters concerning the ongoing appropriateness of the asset valuation;\n\n(f) the circumstances in which interim valuations are to be made, to ensure the approach taken is consistent and transparent;\n\n(g) the triggers that would require an interim valuation of investments outside of the frequency determined under paragraph 40(e) and which reflect the circumstances identified in paragraph 40(f);\n\n(h) a review process to ensure that the valuation policy remains effective;\n\n(i) the validation of valuation outputs including any back-testing procedures; and\n\n(j) the circumstances as to when to accept, reject or reassess valuations of investments to ensure that an RSE licensee’s valuations remain appropriate, including an escalation procedure for the resolution of any disputed valuations.\n\n    41. An RSE licensee must ensure that the key metrics and information referred to in paragraph 40(b) are periodically reviewed by the Board, relevant Board committees and senior management, to ensure that such information and the key metrics remain appropriate to enable sufficient oversight of valuation risk.","sortOrder":5}],"analysis":{"flash_summary":{"complexity_score":6,"scope_assessment":{"changed":false,"description":"The instrument applies to all RSE licensees (para 2) and sets detailed governance, reporting and review obligations. It does not expressly widen or narrow the class of entities captured by the Prudential Standard; APRA retains written discretion to tailor or exclude requirements for particular or specified licensees (para 5), but that discretion is internal to enforcement rather than a stated change to scope."},"complexity_factors":["Broad coverage of governance areas: investment governance, valuation governance, liquidity management and stress testing (see paras 10–15, 36–38, 39–41, 30–35).","Detailed Board-level responsibilities and approvals required for multiple documents and policies (see paras 7–8, 13, 28).","Prescriptive operational requirements: documented objectives, asset‑allocation targets/ranges, monitoring metrics, reporting methodologies and role statements (see paras 18–21, 23–27, 13(b),(e)).","Regular independent review and operational independence requirements, with specified frequencies (paras 16, 27, 33(c)).","Integration and cross-reference to statutory duties under section 52(6) and 52(13) of the SIS Act in formulating strategies (paras 19, 22).","APRA discretion to adjust or exclude requirements in writing for particular or specified RSEs and connected entities (para 5) and requirement to contact APRA about prior discretions (para 6).","Valuation‑specific controls including methodology, external valuations, validation and escalation procedures (paras 40–41).","Operational implementation complexity where RSEs are part of corporate groups and use group functions/policies (para 9)."],"plain_english_summary":"This Prudential Standard, effective 1 January 2023, imposes detailed investment, liquidity, stress‑testing and valuation governance rules on all registrable superannuation entity (RSE) licensees. Boards must set and monitor investment objectives and strategies, approve related policies and ensure regular independent reviews.  \n\nIt creates ongoing reporting, review and compliance duties (including triennial independent reviews and annual stress testing) that increase governance and operational obligations for trustees; APRA retains written discretion to adjust or exclude requirements for specified entities."},"kimi_summary":{"content_quality":"ok","complexity_score":6,"scope_assessment":{"changed":false,"description":"This appears to be a standalone prudential standard with a clear, focused scope on investment governance for superannuation funds. The instrument maintains its original purpose of setting investment governance requirements without significant scope creep. The requirements align with the standard's stated authority under section 34C of the SIS Act, which concerns prudential standards for RSE licensees."},"complexity_factors":["Multiple nested requirements with 'at a minimum' qualifiers throughout (paragraphs 8, 13, 18, 21, 22, 31, 33, 36, 40), creating layers of baseline obligations with potential additional requirements","Cross-references to the Superannuation Industry (Supervision) Act 1993 (SIS Act), particularly sections 52(6), 52(13), and fee rules, requiring external statutory knowledge","Defined terms used but not defined within the instrument itself (RSE licensee, MySuper product, connected entity, business operations, investment option), relying on external definitions","Conditional logic for group structures (paragraph 9) and MySuper products (paragraph 22) creating variable obligations based on entity structure","Operational independence requirements (paragraphs 16, 27) introducing governance structural requirements","Integration requirements between multiple frameworks (investment governance, stress testing, liquidity management, valuation governance) creating interdependent compliance obligations","Discretionary powers granted to APRA (paragraph 5) with unspecified criteria for exercise"],"plain_english_summary":"This legislation requires RSE licensees (the companies running Australian super funds) to maintain strong investment governance: boards must set and oversee investment objectives and strategies, funds must have documented frameworks for managing performance, risk, liquidity and valuations, and they must stress-test portfolios and undergo independent reviews.\n\nIt affects trustees, fund members (indirectly), and APRA, and aims to better protect retirement savings by forcing robust oversight, risk testing and transparent valuation practices."},"flash_summary_failed":{"failed":true,"reason":"A positive credit balance is required for all requests, including BYOK, so fallback providers remain available. Add credits at https://vercel.com/d?to=%2F%5Bteam%5D%2F%7E%2Fai%3Fmodal%3Dtop-up to continue.","source":"analysis-cron"}},"importantCases":[],"_links":{"self":"/api/acts/superannuation-prudential-standard-determination-no-2-of-2022","history":"/api/acts/superannuation-prudential-standard-determination-no-2-of-2022/history","analysis":"/api/acts/superannuation-prudential-standard-determination-no-2-of-2022/analysis","conflicts":"/api/acts/superannuation-prudential-standard-determination-no-2-of-2022/conflicts","importantCases":"/api/acts/superannuation-prudential-standard-determination-no-2-of-2022/important-cases","documents":"/api/acts/superannuation-prudential-standard-determination-no-2-of-2022/documents"}}