The Australian Prudential Regulation Authority (APRA) has launched a formal investigation into Diversa Trustees Limited’s executive remuneration decision-making, extending its scrutiny of the superannuation trustee beyond concerns previously identified with its investment governance framework.
The investigation will assess whether Diversa complied with its regulatory obligations, focusing on whether executive remuneration decisions were made in accordance with APRA’s prudential standards and trustees’ duties under the Superannuation Industry (Supervision) Act.
The latest action follows APRA’s decision late last year to impose additional licence conditions on Diversa after a thematic review of platform trustees identified deficiencies in its investment governance, strategic planning and member outcomes practices.
That review raised concerns about Diversa’s onboarding of new investment options, finding the trustee lacked sufficiently rigorous, well-defined and consistently applied investment selection criteria.
APRA also identified shortcomings in operational due diligence for new investment options, weaknesses in investment monitoring and reporting, and concerns around the management of conflicts of interest.
Diversa is the trustee for 10 registrable superannuation entities and oversees approximately 291,000 member accounts and more than $15 billion in funds under management.
In response to those findings, APRA required Diversa to appoint an independent expert to review its investment governance framework and platform investment menus, develop and implement a remediation plan, and undertake a further assessment of its investment menus against enhanced governance requirements.
The regulator also prohibited the trustee from onboarding new high-risk investment options unless it followed an enhanced due diligence process overseen by the independent expert.
APRA chair John Lonsdale said prudent remuneration practices were fundamental to strong governance and member protection.
“Prudent remuneration practices play a critical role in driving sound governance and protecting the best financial interests of superannuation fund members.
“APRA expects superannuation trustees to ensure remuneration decisions reinforce accountability and appropriately reflect risk and performance outcomes, particularly in circumstances where member outcomes may have been adversely affected.”
The regulator said its latest investigation would focus solely on Diversa’s executive remuneration decision-making and processes.
It added that the investigation would not consider whether Diversa was responsible for member losses arising from the collapse of First Guardian, with those matters currently the subject of ASIC proceedings in the Federal Court.
When the additional licence conditions were imposed, Diversa rejected APRA’s conclusions, saying it did not accept the regulator’s findings regarding its investment onboarding processes, investment option monitoring and reporting, or management of conflicts of interest.
The trustee argued the licence conditions were not necessary or warranted in the circumstances.
Despite disputing APRA’s findings, Diversa said it recognised the regulator’s broader concerns about superannuation platforms and was committed to working with APRA to demonstrate the robustness of its investment governance framework, provide the required assurances and meet its obligations under the additional licence conditions.
In a statement to Super Review, a Diversa spokesperson said: “Diversa always puts our trustee responsibility and members’ best financial interests at the centre of our decisions.”
