APRA targets platform trustees, welcomes stronger powers

APRA is targeting platform trustees' uplift in investment governance in a new consultation, which is underscored by Labor's proposed new powers that will enable it to police new capital requirements for superannuation funds that offer higher-risk options

Announced as part of assistant treasurer Daniel Mulino's package of reforms, APRA will be given greater oversight to ensure trustees have the financial capacity to meet their obligations under the proposed compensation scheme.

This is in lockstep with Mulino empowering ASIC to direct super trustees to commence remediation where an investment option fails and there is "reasonable suspicion" a trustee has breached its obligations. In cases where a trustee is found to have failed its duties, members would be entitled to compensation for their full capital losses.

APRA will consult on the details of the framework once the government finalises the relevant legislation.

APRA said the government's proposed compensation scheme will complement its broader work to strengthen investment governance in super and member protection by reducing the likelihood of trustee failures and improving outcomes when failures occur.

This plays into the prudential regulator's multi-year efforts to lift investment governance standards across the superannuation industry - particularly within the platform trustee segment.

More pressing is APRA's upcoming consultation, scheduled for next month, which will shake up platforms' investment governance standards in a bid to reduce the likelihood of member harm.

"The proposals directly address many of the shortcomings that were identified by APRA in its 2025 review of industry practices covering around 95% of platform assets under management," APRA said.

Up for discussion is the strengthening of requirements across eight areas covering the full investment management lifecycle.

This includes trustees ensuring their investment management capability commensurate to the complexity of their investment menus.

Addressing weaknesses in onboarding, monitoring and offboarding practices, and material conflicts, as well as improving member-level diversification will also be on the agenda.

Ultimately, APRA said it wants better oversight and accountability from platform trustees in the wake of the Shield and First Guardian Master Fund collapses, in which one or both sat on several platforms such as Equity Trustees and Netwealth.

While the investment governance reforms would apply to all trustees, APRA said the impact will be "most significant for platform trustees, given their investment menus are typically broader, platform products are more complex, and financial advisers can play a larger role in selecting and recommending investment options."

APRA foresees the proposals to have little impact on trustees with strong investment governance and simpler business models.

APRA chair John Lonsdale said: "The government's proposed compensation scheme will reinforce APRA's proposals by creating a stronger incentive for trustees to remediate poor investment governance."

"APRA's investment governance reforms aim to raise standards across the sector and reduce the likelihood of member harm from poor investment options. Together, these key reforms strengthen member protection significantly."