Superannuation (prudential standard) determination No. 2 of 2022

The instrument organises its requirements around a small set of interlocking concepts: Board responsibility, the investment governance framework, investment objectives and strategy, investment selection and monitoring, review and stress-testing, liquidity management, and valuation governance. Each is defined or constrained by specified minimum contents and frequencies.

Board responsibility: The Board is identified as the ultimate decision-maker and responsible entity for investment management within the RSE licensee’s business operations (paragraphs 7-8, 12). The Board must approve investment objectives for each investment option, approve investment strategies covering both the whole RSE and each option, regularly monitor the achievement of objectives, and take timely action on investment reports (paragraph 8). Where group policies or functions are used, the Board must approve their use and ensure they are appropriate to the RSE licensee’s business (paragraph 9).

Investment governance framework: Defined as the totality of systems, structures, policies, processes and people to address the RSE licensee’s responsibilities with regard to investments (paragraph 11). The Framework must be proportionate to an RSE licensee’s size, business mix and complexity (paragraph 14) and include specific components (paragraph 13): investment objectives; reporting measures methodology; investment strategy; Board policies; role statements; structures and processes for performance measurement, risk assessment, stress-testing, valuations and reporting; and a review process.

Investment objectives and investment strategy: Objectives must be specific, measurable and aligned with the size, business mix and complexity of the RSE, and include at minimum a return objective and a risk objective (paragraph 18). When formulating strategy, the RSE licensee must document how it had regard to the factors in section 52(6) of the SIS Act (paragraph 19). Diversification analysis must identify risk factors, sources of return, interaction across assets and target exposures, and assess implementation feasibility with duties to beneficiaries in mind (paragraph 20). For strategies with multiple assets/classes, the RSE licensee must set asset allocation targets and ranges, specify how to change them, and a policy to maintain allocations within ranges (paragraph 21). MySuper products have additional documentation obligations including compliance with s52(13) and relevant fee rules (paragraph 22).

Investment selection and monitoring: The Standard requires an investment selection process with due diligence commensurate with the investment’s nature (paragraph 23). That process must ensure sufficient understanding of the investment, assess the investment under stress, and ensure appropriateness for the investment option (paragraph 24). Monitoring obligations include determining measures and appropriate performance benchmarks, having Board-approved measures (other than benchmarks for individual investments), and regularly reporting performance and sources of out-performance or under-performance to the Board and senior management (paragraphs 25-26). Those who undertake performance assessment must be operationally independent from those making the investments (paragraph 27).

Review and stress-testing: The Framework must be independently reviewed at least every three years (paragraphs 16-17). Investment strategies must be reviewed at least annually, with triggers for interim reviews, reporting processes to the Board and criteria for change (paragraphs 28-29). The Standard mandates a comprehensive investment stress testing programme approved by the Board and integrated into the governance framework (paragraph 30). The programme must identify adverse stress scenarios, test strategies prior to implementation and at least annually, include specific documentation of objectives, methodology, roles, outputs, review processes, ad hoc testing triggers and data quality processes (paragraphs 31-34). Boards must document scenario selection methodology and how results were used (paragraph 35).

Liquidity management: Each RSE must have a Board-approved liquidity management plan covering each investment option that outlines measurement procedures, stress scenario management, definition of "liquidity event", prescribed actions on a liquidity event, roles/responsibilities, and reporting metrics to the Board and senior management (paragraphs 36-37). Liquidity stress-testing must be part of the investment stress-testing programme (paragraph 38).

Valuation governance: RSE licensees must maintain a valuation governance framework including a Board-approved valuation policy covering roles, reporting metrics, valuation methodologies and inputs, circumstances for independent external valuations, valuation frequency, circumstances/triggers for interim valuations, review processes, validation/back-testing and escalation processes for disputed valuations (paragraphs 39-41).

APRA discretion and formality: APRA may adjust or exclude specific requirements for particular RSE licensees or connected entities (paragraph 5). Any exercise of power or discretion by APRA under this Standard is required to be in writing (paragraph 4). RSE licensees must contact APRA if they intend to place reliance on a previous exercise of discretion under a prior version of the Standard (paragraph 6).

These core concepts interact as a system of documentation, independent review and governance oversight, with the Board placed at the centre as approver and recipient of reporting and decisions.

The Standard applies to all RSE licensees (paragraph 2). Within an RSE licensee’s operations the Standard specifies roles and groups affected:

• Boards of RSE licensees: the Board has primary duties across approval, oversight and decision-making (paragraphs 7-8, 12). The Board must approve investment objectives, strategies, review policies, stress-testing programmes, liquidity plans and valuation policies (paragraphs 8, 28, 30, 36, 40).

• Senior management and Board committees: The Standard requires regular reporting to, and review by, senior management and relevant Board committees; many policies must specify the roles and responsibilities of those groups (paragraphs 13(e), 33(b), 34(a-b), 36(f), 40(a-b)).

• Persons in investment roles: The Framework must include role statements detailing responsibilities and reporting lines for all roles related to investment activities (paragraph 13(e)). Persons tasked with performance assessment must be operationally independent from persons responsible for making investments (paragraph 27). The Framework must ensure personnel are aware of and can monitor compliance (paragraph 15).

• Connected entities and corporate groups: Where an RSE licensee is part of a corporate group and uses group policies or functions, the Board must approve such use and ensure appropriateness for the RSE’s business operations (paragraph 9). APRA’s ability to adjust or exclude specific requirements can expressly be applied to connected entities (paragraph 5).

• External service providers and valuers: The Standard contemplates use of independent external valuations and external parties for stress testing or valuation validation where appropriate, and requires the valuation policy to state the circumstances when independent external valuations are to be obtained (paragraph 40(d), 40(i)).

• MySuper products and their beneficiaries: MySuper products receive additional specified attention. For MySuper investment strategies the RSE licensee must document additional matters including diversification, compliance with s52(13) of the SIS Act and compliance with MySuper fee rules (paragraph 22). Performance measures for each MySuper product must be determined (paragraph 25).

• APRA itself: The Standard explicitly reserves a supervisory role to APRA via written exercises of discretion (paragraph 4), the power to adjust or exclude requirements for specific RSE licensees or connected entities (paragraph 5), and the obligation on RSE licensees to contact APRA to rely on previous discretions (paragraph 6).

Who pays and who decides: Boards decide policies and approve strategies; senior management and investment teams implement. Compliance costs are borne by the RSE licensee (and indirectly by beneficiaries via fees); where the RSE belongs to a group, there may be centralised costs and allocation of responsibilities across the group (paragraph 9). External costs may arise from independent reviews, external valuers and stress-testing tools and data. RSE licensees making use of prior APRA discretions must bring APRA into the decision loop (paragraph 6), and APRA retains the formal ability to vary requirements in writing (paragraphs 4-5).

This section distils the specific duties imposed on the Board and RSE licensee and highlights where the Standard creates rights or discretions.

Board duties (paragraphs 7-8, 12)

• Ultimate responsibility: The Board is "ultimately responsible for the establishment, implementation, oversight and maintenance" of the investment governance framework and for the sound and prudent management of investments (paragraphs 7, 12).
• Approvals and monitoring: The Board must at minimum approve investment objectives for each investment option, approve investment strategies for the whole RSE and each investment option, regularly monitor whether objectives are being met, and take timely action on investment reports (paragraph 8).
• Documentation: The Board must approve Board policies related to investment activities (paragraph 13(d)) and must document the methodology for stress scenario selection and how stress testing results have been used (paragraph 35).

Investment governance framework duties (paragraphs 10-15, 16-17)

• Design and maintenance: RSE licensees must maintain an investment governance framework appropriate to size, business mix and complexity (paragraphs 10, 14).
• Minimum contents: The framework must contain investment objectives for each option, methodology for reporting measures, investment strategies, Board policies, role statements, structures/processes for performance and risk measurement, stress-testing, valuations and reporting, and a review process (paragraph 13).
• Personnel awareness and controls: Procedures must ensure persons in investment-related roles are aware of and can monitor compliance with the framework (paragraph 15).
• Independent review: The framework must be reviewed comprehensively by operationally independent, trained and competent persons at least every three years (paragraphs 16-17).

Investment strategy and objective duties (paragraphs 18-22)

• Objectives: Investment objectives must be specific, measurable, aligned to the size/business mix/complexity, and include at minimum a return and a risk objective (paragraph 18).
• Regard to SIS Act: When formulating strategies, the RSE licensee must document how it had regard to section 52(6) of the SIS Act (paragraph 19).
• Diversification & asset allocation: When determining appropriate diversification, the RSE licensee must identify risk factors/sources of return, model their interactions, set target exposures, and determine asset classes/individual assets to achieve those exposures considering duties to beneficiaries (paragraph 20). For multi-asset strategies, the RSE licensee must determine asset allocation targets and ranges, the basis for changing them, and a policy to monitor and maintain allocations within ranges (paragraph 21).
• MySuper specifics: For MySuper products, additional documentation is required to show diversification over multiple risk factors, compliance with s52(13), and compliance with MySuper fee rules (paragraph 22).

Investment selection and monitoring duties (paragraphs 23-27)

• Due diligence: The investment selection process must ensure due diligence commensurate with the nature and characteristics of the investment prior to selection (paragraph 23).
• Appropriateness: Selection processes must ensure sufficient understanding of the investment, assessment under stress scenarios, and appropriateness for the investment option (paragraph 24).
• Measures and benchmarking: The RSE licensee must determine appropriate monitoring measures including performance benchmarks and a methodology for setting them; measures (other than benchmarks for each investment) are to be Board-approved (paragraph 25). Performance of each investment option and MySuper product must be regularly reported to the Board and senior management with analysis of sources of out-/under-performance (paragraph 26).
• Operational independence: Persons undertaking performance assessment must be operationally independent from those responsible for investment decisions (paragraph 27).

Review, stress testing and liquidity duties (paragraphs 28-38)

• Strategy review policy: RSE licensees must have a Board-approved review policy requiring at minimum at least annual reviews against objectives, triggers for interim review, reporting processes, and criteria for strategy change (paragraph 28). The Board must ensure any decision to amend strategy is supported by sufficient justification and analysis (paragraph 29).
• Stress testing: A comprehensive Board-approved stress testing programme is required, with specified adverse scenarios, testing prior to implementation and at least annually, documentation of methodology/assumptions/roles/outputs, review processes and data quality controls (paragraphs 30-35). Boards must document scenario selection methodology and how results were used (paragraph 35).
• Liquidity: A Board-approved liquidity management plan for each RSE must cover each investment option, measurement and management procedures, stress-scenario considerations, definition of liquidity events and prescribed actions, roles and responsibilities, and reporting metrics (paragraphs 36-37). Liquidity stress testing must be integrated into the overall stress testing programme (paragraph 38).

Valuation duties (paragraphs 39-41)

• Valuation governance framework: Must be adequate to identify and manage valuation risk and include a Board-approved valuation policy specifying roles, reporting metrics/frequency, valuation methodology and inputs, circumstances for independent external valuations, valuation frequency and interim valuations, triggers for interim valuations, validation/back-testing, and escalation for disputed valuations (paragraphs 39-41). The Board and senior management must periodically review the reporting metrics and key information (paragraph 41).

APRA’s discretion and obligation to engage (paragraphs 4-6)

• APRA may adjust or exclude specific requirements for particular RSE licensees or connected entities (paragraph 5).
• APRA must exercise power or discretion under the Standard in writing (paragraph 4).
• RSE licensees must contact APRA if they seek to rely on a previous exercise of discretion by APRA under a previous version of the Standard (paragraph 6).

Rights and discretions

• The Standard does not create affirmative rights of private parties; its procedural features create rights to seek APRA adjustments or exclusions under paragraph 5 and to negotiate with APRA when relying on prior discretions (paragraph 6). The Standard gives Boards discretion to set asset allocation targets, stress scenarios, review triggers and other choices within specified minimum content and frequencies, but requires Board documentation and justification for decisions (paragraphs 21, 31-35, 28-29).

Collectively, the duties impose documentary, procedural and oversight obligations on Boards, management and specialist roles, while APRA retains the ability to tailor or remove requirements for particular cases in writing.

The Prudential Standard text provided does not specify civil or criminal penalties, administrative fines or explicit enforcement mechanisms within its own text. The Standard is made under section 34C of the SIS Act (paragraph 1), and therefore any express statutory enforcement powers, sanctions or remedies would originate in the enabling legislation rather than in the Standard itself. Within the Standard itself APRA’s supervisory reach manifests in two operational mechanisms.

• Exercise of discretion and adjustments: APRA is expressly empowered to adjust or exclude specific requirements in relation to particular RSE licensees or connected entities (paragraph 5). This is an affirmative supervisory instrument rather than a listed sanction; it permits APRA to alter compliance obligations on a case-by-case basis.

• Formality and prior discretions: APRA must exercise powers and discretions under this Standard in writing (paragraph 4). RSE licensees that intend to rely on a previous exercise of discretion by APRA under a previous version of the Standard must contact APRA (paragraph 6). This creates an administrative process by which licensees and APRA capture the regulatory record and formalise any departures from the Standard.

What the Standard does not do, in the instrument supplied:

• It does not set out specific penalties, enforcement actions, contraventions, or detailed supervisory processes such as directions, enforceable undertakings, civil penalties, or resolution steps. Those would be matters of the SIS Act and APRA’s broader supervisory toolkit, but the Standard itself is silent on those mechanisms.

Practical enforcement implications for a practitioner advising an RSE licensee:

• Non-compliance with the Standard leaves the licensee exposed to APRA supervision under the SIS Act. The Standard requires specified approvals, documentation and the use of operationally independent reviewers; failure to implement these could lead APRA to use statutory tools under the SIS Act (not enumerated here). Because APRA’s adjustments and exclusions under paragraph 5 are discretionary and must be in writing under paragraph 4, RSE licensees should document any engagement with APRA and seek written confirmation for any tailored relief.

• The requirement in paragraph 6 to contact APRA if relying on a prior exercise of discretion creates an operational compliance obligation: reliance without contacting APRA would be inconsistent with the Standard’s explicit procedure.

• The Standard’s detailed documentation requirements (for example, Board approvals, stress testing methodology and records, valuation policies and records of reviews) create an evidentiary trail. In a regulatory review, the presence or absence of those materials will be central to APRA’s assessment under the SIS Act.

In short, the Standard prescribes minimum governance and documentary standards, furnishes APRA with an administrative tailoring mechanism, and leaves the specific statutory enforcement powers to the enabling legislation rather than setting them out in this instrument.

The Prudential Standard expressly situates itself within the SIS Act and repeatedly cross-references provisions of that Act. The instrument is made under section 34C of the SIS Act (paragraph 1) and repeatedly directs RSE licensees to have regard to and comply with particular SIS Act provisions when formulating and documenting strategies.

• Direct references to the SIS Act: The Standard requires that the Board’s approved investment strategy be consistent with the RSE licensee’s duties to beneficiaries, "including those in section 52(6) and (13) (if applicable) of the SIS Act" (paragraph 8(b)). Paragraph 19 requires that when formulating each investment strategy, the RSE licensee must document how it has regard to the factors in section 52(6) of the SIS Act. Paragraph 22 requires that MySuper strategies document compliance with section 52(13) and the relevant MySuper fee rules in the SIS Act. These explicit cross-references mean the Standard functions as an implementing governance instrument that requires evidence of regard to statutory fiduciary or prudential duties contained in the SIS Act.

• MySuper and fee rules: The Standard links its governance requirements for MySuper products to the fee rules in the SIS Act (paragraph 22(c)). That linkage requires RSE licensees to align product-level fee compliance obligations with governance and strategy documentation.

• APRA’s statutory powers: The Standard is silent on enforcement detail but is made under the SIS Act (paragraph 1). Enforcement mechanisms, directions, and statutory remedies would flow from the SIS Act and APRA’s supervisory framework rather than from the Standard itself. The Standard’s requirement that APRA exercise discretions in writing (paragraph 4) and the mechanism to contact APRA to rely on prior discretions (paragraph 6) embed administrative law features within APRA’s exercise of power under the SIS Act.

• Corporate and group law interactions: Paragraph 9 addresses interaction with group arrangements. Where the RSE licensee is part of a corporate group and uses group policies or functions, the Board must approve their use and ensure they give appropriate regard to the RSE licensee’s business operations. This provision creates a governance interface between prudential regulation and corporate governance: group-level policies are permitted but must be tailored and formally approved at the Board level for the regulated entity.

What the Standard does not do with other laws:

• The instrument does not explicitly reference other regulatory regimes (for example, corporations law, tax, payments law or external dispute resolution schemes) in the text provided. It nevertheless creates compliance tasks that will interact in practice with other legal obligations (for example, directors’ duties under corporations law, outsourcing requirements under prudential or corporate rules). The explicit references to sections 52(6) and 52(13) of the SIS Act mean RSE licensees must align strategy documentation with those statutory duties.

Operational effect:

• Practitioners should view the Standard as implementing and operationalising prudential duties contained in the SIS Act. Compliance with the Standard requires not only governance implementation but also demonstrable linkage in documentation to statutory duties under the SIS Act and MySuper fee rules. Where APRA has previously granted discretions under prior versions, the licensee must contact APRA before relying on those discretions for compliance with this Standard (paragraph 6), creating an administrative interface between prior regulatory treatment and current governance obligations.

The text supplied contains limited explicit amendment history. From the document itself the following can be stated with certainty.

• Creation and commencement: The Standard is made by APRA under s34C of the SIS Act and commenced on 1 January 2023 (paragraphs 1 and 3). That commencement date is the principal temporal marker contained in the instrument.

• Previous versions and APRA discretions: Paragraph 6 acknowledges previous exercises of discretion by APRA under earlier versions of this Prudential Standard. It mandates that any RSE licensee seeking to rely on a previous APRA discretion for the purposes of complying with this Standard must contact APRA. This clause implies a history of earlier iterations of the Standard and a framework for transition and reliance on historical regulatory treatment.

• Ongoing adjustment mechanism: Paragraph 5 empowers APRA to adjust or exclude specific requirements in relation to particular RSE licensees or connected entities. This is not an amendment to the Standard itself but an administrative mechanism to tailor obligations to entities or groups. Paragraph 4 requires APRA to exercise any power or discretion under the Standard in writing, which provides a formal administrative record for any tailored treatment.

• No textual record of prior amendments in supplied text: The supplied instrument does not include a schedule of prior amendments, dates of earlier versions, or an express "amendment history" table. The presence of footnote markers in the original text (for example [_ftn1], [_ftn2]) indicates the Standard may have accompanying explanatory materials, but those are not provided here.

Implications for practitioners:

• If an RSE licensee relied on APRA discretions granted under prior versions of this Standard, paragraph 6 imposes an affirmative administrative step to re-engage with APRA. The written nature of APRA’s exercises of discretion (paragraph 4) means prior discretions should exist in APRA’s records, but the Standard requires direct contact to establish continuing reliance.

• Because the Standard allows APRA to adjust or exclude requirements for specific entities (paragraph 5), RSE licensees should review their regulatory correspondence with APRA to determine if any entity-specific adjustments apply and ensure the adjustments are captured in writing.

• Any analysis of amendment history beyond the commencement date and the presence of past discretions cannot be drawn from the text provided. Practitioners requiring a complete amendment trail should obtain APRA’s historical Standard documents and any written discretions or instrument variations.

The supplied Prudential Standard does not include or reference any litigation history. There are no judicial decisions, tribunal determinations, or regulatory reviews cited or summarised within the text provided. The instrument is a regulatory standard setting minimum governance and documentation requirements; it does not itself catalogue or summarise litigation that may have informed it.

Practical consequences:

• There is no litigated interpretation contained in the instrument to guide how courts have read or applied its requirements. Any questions about interpretation, such as the meaning of "operationally independent", "appropriate", "sufficient understanding", or the ambit of APRA’s discretion under paragraph 5 would therefore be novel or resolved through administrative review or litigation external to this document.

• For advisers preparing for possible disputes or APRA enforcement action, the absence of cited litigation in the Standard means that ambiguities will be resolved by reference to the text of the Standard, the SIS Act and the factual record of the licensee’s governance processes. Boards and management should treat that absence as signalling the need for careful documentation and defensible decision-making rather than reliance on settled case law.

• If litigated issues arise in future (for example concerning the sufficiency of an RSE licensee’s stress testing, valuation processes, or whether APRA lawfully excluded certain requirements for an entity), those cases will need to be located in judicial databases and officials’ records; they are not summarised in the Standard itself.

Several practical traps, frequent sources of operational friction and compliance risks flow directly from the Standard’s language and structure. The following points identify those "gotchas" and explain the mechanism of the risk.

1. APRA discretion and written-only variance (paragraphs 4-6)

   • Gotcha: RSE licensees may assume earlier informal concessions or verbal assurances from APRA survive the introduction of this Standard. Paragraph 6 requires contact with APRA to rely on previous discretions and paragraph 4 requires APRA’s exercises of discretion under this Standard to be in writing. Mechanism: Reliance on unrecorded or unconfirmed prior relief risks losing that relief, exposing the licensee to supposed non-compliance.

2. Board responsibility remains ultimate, even with group functions (paragraphs 7, 9, 12)

   • Gotcha: Boards that delegate significant functions to group-level policies may misjudge the continuing obligation to approve and ensure appropriateness. Paragraph 9 requires the Board to approve the use of group policies and ensure their appropriateness to the RSE business. Mechanism: Delegation does not remove the Board’s duty to validate group arrangements or document how they satisfy RSE-specific obligations.

3. Operational independence requirements (paragraphs 16, 27)

   • Gotcha: The Standard requires independent reviewers for triennial reviews and operational independence for persons assessing performance. Boards using internal teams for both design and performance assessment must segregate functions or secure genuinely independent reviewers. Mechanism: Failure to maintain independence undermines the required review and monitoring rigour and could trigger APRA scrutiny.

4. Documentation thresholds and auditability (multiple paragraphs)

   • Gotcha: Terms like "document how it has regard to section 52(6)" (paragraph 19) and "documented methodology" (paragraph 35) create a documentation standard that is more than box-ticking. Mechanism: Poorly evidenced "regard" or undocumented decision rationales will be difficult to defend in regulatory review; the Board must show how statutory factors were considered.

5. Stress testing and data demands (paragraphs 30-35, 38)

   • Gotcha: Stress-testing requires "relevant and reliable data" (paragraph 33(f)) and annual frequency at minimum (paragraph 33(a)). For illiquid or private asset classes, constructing credible stress scenarios and obtaining reliable data is resource-intensive. Mechanism: Insufficient data or weak scenarios will reduce the credibility of stress tests; engaging external modelling providers or custodial data will increase costs.

6. Valuation policy triggers and disputed valuations (paragraph 40)

   • Gotcha: The Standard requires circumstances for independent external valuations (paragraph 40(d)) and escalation procedures for disputed valuations (paragraph 40(j)). For complex or bespoke holdings, RSEs must pre-specify triggers for independent valuation and a transparent dispute resolution path. Mechanism: Without pre-defined triggers and dispute resolution, valuations may be contested by auditors, APRA or beneficiaries.

7. MySuper additional obligations (paragraphs 22, 25)

   • Gotcha: MySuper investment strategies must comply with s52(13) and fee rules. The Standard requires Board-approved measures for MySuper products (paragraph 25). Mechanism: An RSE offering MySuper must ensure its governance documents explicitly address MySuper statutory constraints and fee compliance, which may constrain asset allocation and fee arrangements.

8. Asset allocation ranges and rebalancing policy (paragraph 21)

   • Gotcha: The Standard demands asset allocation targets and ranges and a policy "to monitor and maintain the asset allocation within the determined ranges within a reasonable timeframe." The undefined "reasonable timeframe" is a judgement call. Mechanism: Boards must set and justify rebalancing tolerances and frequency in policy to avoid differing expectations with auditors or APRA.

9. Interaction with fiduciary duties (paragraphs 8, 19)

   • Gotcha: The Standard requires strategies consistent with duties to beneficiaries, including specified SIS Act sections. But the Standard does not define these duties; Boards must map their decisions to the statutory duties in the SIS Act. Mechanism: Risk of misalignment between fiduciary interpretations and Board actions if insufficient legal review or documentation is undertaken.

10. Frequency multiplicity and resourcing (paragraphs 16, 28, 32)

    • Gotcha: The Standard layers multiple minimum frequencies: triennial independent framework review, annual strategy review, at least annual stress testing, periodic Board review of stress testing results (paragraphs 16, 28, 32, 34). Mechanism: Smaller RSE licensees may face significant resourcing and cost burdens to comply with overlapping review and reporting cycles.

11. No explicit enforcement statement in the Standard (Penalties section)

    • Gotcha: The Standard does not state enforcement processes or penalties within its text. Boards may misread this as leniency. Mechanism: The absence of in-text penalties does not insulate non-compliance from APRA’s statutory powers under the SIS Act; RSE licensees must assume regulatory consequences attach to non-compliance.

Each of these gotchas flows from an explicit paragraph or set of paragraphs in the Standard. Boards and senior management should treat them as compliance-critical items requiring documented policies, resource planning, and, where necessary, formal APRA engagement.

This section sets out practical steps and record-keeping practices that translate the Standard’s minimum requirements into an operational compliance plan. Each step maps to particular paragraphs from the Standard.

1. Confirm applicability and governance accountability (paragraphs 1-3, 7-9)

   • Action: Verify that the entity is an RSE licensee and thus subject to the Standard. Update the Board’s formal governance charter to record that the Board is "ultimately responsible" for investment governance and investment management, and document Board approvals of delegation limits.
   • Record: Board minute recording responsibility; conflict of interest register for group policies.

2. Establish or revise the investment governance framework document (paragraphs 10-15)

   • Action: Produce a single Investment Governance Framework document that contains the items required in paragraph 13: clearly stated investment objectives for each investment option, methodology for investment reporting measures, documented strategies for the whole RSE and each option, all Board investment policies, role statements for investment-relevant functions, and processes for performance measurement and stress-testing.
   • Record: Framework document, version control, and Board resolution approving it.

3. Implement role statements and segregation (paragraphs 13(e), 15, 27)

   • Action: Create role statements for all investment and monitoring roles detailing responsibilities, reporting lines and controls. Ensure persons assessing performance are operationally independent from investment decision-makers; if internal independence cannot be demonstrated, include an external independent reviewer or committee.
   • Record: Role statements, proof of independence, CVs or qualification records for reviewers.

4. Set and document investment objectives and strategy (paragraphs 18-22)

   • Action: For each investment option document a specific and measurable return objective and a risk objective. For each strategy, document how the RSE licensee had regard to s52(6) of the SIS Act (paragraph 19). For multi-asset strategies set asset allocation targets and ranges, the basis for change and a policy for rebalancing and monitoring.
   • Record: Strategy papers, Board resolutions, evidence of scenario analysis, and mapping to s52(6) and (if relevant) s52(13).

5. Design and document the investment selection process (paragraphs 23-24)

   • Action: Create a documented investment selection process that sets due diligence standards proportionate to the investment type, specifies required legal, tax and valuation inputs, and requires explicit assessment of how the investment will behave under the stress scenarios the RSE licensee will use.
   • Record: Due diligence checklists, investment committee minutes, third-party provider reports.

6. Create performance measurement, benchmarking and reporting processes (paragraphs 25-27)

   • Action: Determine performance measures and benchmarks for each MySuper product, each investment option and each investment as appropriate. Document the methodology for setting benchmarks. Ensure regular reporting to Board and senior management includes attribution of out-/under-performance and that performance assessments are produced by operationally independent parties.
   • Record: Benchmark methodology, monthly/quarterly performance packs, Board papers, independence attestations.

7. Implement review and change governance (paragraphs 16-17, 28-29)

   • Action: Put in place a review policy that mandates at least annual review of each investment strategy against objectives, with triggers for interim reviews and processes for reporting and deciding on strategy changes. Commission a comprehensive independent review of the investment governance framework at least every three years.
   • Record: Review policy, scheduled review calendar, reports from independent reviewers and Board minutes evidencing consideration.

8. Build a comprehensive investment stress testing programme (paragraphs 30-35)

   • Action: Develop a Board-approved stress testing programme that specifies objectives, methodology, assumptions, frequency (at least annual), and risk factors. Define adverse stress scenarios, model expected outcomes under those scenarios, document roles and responsibilities, and set processes for validating data and assumptions. Ensure results are periodically reviewed by the Board and embedded in decision-making.
   • Record: Stress testing methodology, scenario library, outputs, Board consideration records and records of changes made as a result of stress-testing.

9. Put in place a liquidity management plan (paragraphs 36-38)

   • Action: Develop a Board-approved liquidity management plan for each RSE that covers each investment option, measurement procedures, stress scenario considerations, defines liquidity events and prescribed actions, assigns roles and responsibilities, and specifies key metrics for reporting to the Board. Integrate liquidity stress testing into the investment stress testing programme.
   • Record: Liquidity plan, key metrics dashboard, triggers and log of any liquidity events and actions taken.

10. Establish a valuation governance framework and valuation policy (paragraphs 39-41)

    • Action: Create a Board-approved valuation policy that specifies valuation methodologies by asset class, the sources of valuation inputs, circumstances for independent external valuations, frequency of valuations, triggers for interim valuations, validation/back-testing procedures and escalation of disputed valuations. Ensure the Board periodically reviews valuation reporting metrics.
    • Record: Valuation policy, valuation methodology appendices, independent valuation reports, back-testing results, and minutes of Board review.

11. Document interaction with the SIS Act and MySuper obligations (paragraphs 8, 19, 22)

    • Action: Explicitly map strategies to statutory duties referenced in the SIS Act (for example s52(6) and, where applicable, s52(13)). For MySuper products, document compliance with fee rules referenced in the SIS Act.
    • Record: Legal memoranda, compliance mapping documents and Board sign-off.

12. Manage group policy usage and connected entities (paragraph 9)

    • Action: If group-level policies or functions are used, obtain documented Board approval for their use and evidence that the group policies are appropriate for the RSE licensee’s business operations. Where group entities are involved, assess whether paragraph 5 adjustments or exclusions from APRA apply or should be sought.
    • Record: Board minutes approving group policy use, assessment reports and any written APRA adjustments.

13. Engage with APRA where necessary (paragraphs 4-6)

    • Action: If relying on a previous APRA discretion, contact APRA to re-establish reliance in writing (paragraph 6). If the RSE licensee seeks an adjustment or exclusion, apply to APRA and obtain written confirmation of any variation (paragraph 5), noting that APRA’s exercises of discretion under the Standard must be in writing (paragraph 4).
    • Record: Applications to APRA and APRA’s written responses.

14. Resourcing and capability (paragraphs 15, 16, 33)

    • Action: Assess internal capability and resourcing required to meet minimum frequencies for review and stress testing. Where necessary, engage external specialists for independent reviews, valuation services and stress-testing models. Maintain training and competence records for those involved in independent reviews.
    • Record: Budget and resource plans, engagement letters with external providers, training logs.

15. Record retention and audit trail

    • Action: Maintain a policy for retention of documentation evidencing compliance: Board approvals, minutes, models, stress-test outputs, valuation evidence, due diligence files, external auditor or valuer reports, and correspondence with APRA. Ensure documents are version-controlled and accessible for APRA review.
    • Record: Document retention policy and indexed archive.

Operational checklist and schedule

• Create a compliance calendar that aligns: annual strategy reviews, annual stress testing, triennial independent framework review, valuation cycles, regular performance reporting (e.g. monthly/quarterly), and Board committee meetings. Assign owners for each deliverable.

Final note on proportionality

• The Standard requires that frameworks and processes be "appropriate to the size, business mix and complexity" of the RSE licensee’s business operations (paragraph 14). This provides room for proportionate implementation, but RSE licensees must document how proportionality was determined and ensure minimum contents and frequencies are observed.

By following this set of steps and maintaining contemporaneous records tied to the specific paragraphs of the Standard, an RSE licensee can assemble the documentary evidence required to demonstrate compliance with the Board-centric governance model APRA has prescribed.