Executive summary

Sound investment governance by trustees is central to preventing member harm and maintaining confidence in the superannuation system. Although members ultimately bear investment risk in a defined contribution system, strong governance helps trustees identify emerging risks and act before they result in member harm.

The superannuation investment landscape is evolving. Investment offerings are becoming broader and more complex, member-directed investment is becoming more prevalent, and trustees are increasingly relying on advisers, promoters and other third parties. These developments increase the importance of strong trustee capability, independent decision-making and effective safeguards.

These developments are particularly relevant in the platform sector. Platform trustees often oversee large and complex investment menus, rely on adviser and promoter-led distribution, and allow members considerable discretion to concentrate their savings in individual investments. These features can make investments harder to oversee, create conflicts that may influence trustee decisions and increase the risk of severe loss where investments perform poorly or fail.

APRA’s supervisory work has found that these heightened risks have not always been matched by sufficiently strong governance practices. Weaknesses include inadequate scrutiny when investments are onboarded, ineffective monitoring and remediation, inconsistent enforcement of investment limits, poor management of conflicts involving third parties, and insufficient capability and resources to oversee complex investment menus.

APRA has elevated concerns about the platform sector, which has been the focus of intensified enforcement activity. While platform products represent around 15% of APRA-regulated superannuation assets, trustees offering platform products accounted for 70% of announced superannuation enforcement actions in 2025-26. APRA’s concerns occur in the context of the platform sector continuing to grow, with investments via platform products reaching $450 billion in June 2026, up 14% year-on-year.

The collapses of Shield and First Guardian illustrate the scale and severity of harm that can occur when members are highly concentrated in risky investments without effective trustee oversight and safeguards. Almost 12,000 members lost around $1 billion in retirement savings through Shield and First Guardian. Within APRA-regulated funds, losses were spread across 4 affected platform trustees, although 2 trustees subsequently provided compensation for capital losses.

APRA has undertaken extensive supervisory and enforcement activity to lift investment governance standards. This has included a thematic review covering trustees responsible for 95% of platform assets, an industry-wide direction for platform trustees to accelerate improvements and enforcement action against 5 trustees. This activity is driving improvements in practices. Nevertheless, material weaknesses remain, particularly in the platform sector, and existing requirements have not produced sufficiently consistent or timely improvement.

Policy reform is the next phase of APRA’s multi-year work to strengthen investment governance. It will address weaknesses identified through supervision and enforcement while establishing firmer minimum standards as investment offerings, distribution arrangements and trustee business models continue to evolve. The objective is to ensure trustees have the capability, controls and accountability needed to manage current and emerging investment governance risks.

APRA is proposing 8 changes: 3 reforms that introduce stronger safeguards and 5 changes that largely codify and strengthen existing expectations.

The 3 reforms focus on risks most evident in platform and other member-directed investment models. They would require trustees to:

•    set and enforce member-level investment limits to reduce the risk of severe loss from concentrated investments in higher-risk options;

•    strengthen conflicts management in relation to third parties, including advisers and promoters; and

•    align trustee resources and capability with the size, complexity and nature of their investment offerings.

The other 5 changes would codify and, in some areas, strengthen APRA’s expectations for rigorous investment onboarding, ongoing monitoring, timely remediation, reliable valuations and clear accountability. They would translate expectations previously communicated through supervision and APRA’s 2025 industry letter into clear minimum requirements.

Together, the changes would establish a more complete investment governance cycle, from rigorous scrutiny before investments are made available through to consistent monitoring and timely action when concerns arise. Trustees would remain accountable for investment decisions made with the support of advisers, promoters, investment managers and other third parties.

The proposals would apply to all trustees because the underlying principles are relevant across the industry, particularly as member-directed offerings become more prevalent. APRA has sought to get the balance right by introducing stronger safeguards which in practice, are expected to have the greatest impact on platform trustees, where the identified risks and weaknesses are greatest without imposing disproportionate burdens on trustees with sound practices. Trustees with robust investment governance practices are not expected to be materially affected. 

Stronger requirements involve trade-offs, particularly where member-level investment limits constrain the extent to which members can concentrate their retirement savings in higher-risk options. APRA has sought to preserve meaningful investment choice while ensuring that choice is supported by effective trustee oversight, independent decision-making, clear accountability and prudent risk controls.

Investment limits provide guardrails that limit choice, but they can materially reduce the scale of member loss where other controls fail. They would help protect members, support confidence in the superannuation industry, and limit the amount industry may ultimately need to contribute to compensation where failures occur.

The proposals would not fully eliminate the risk of losses or prevent every instance of member harm. Members will continue to bear investment risk, as appropriate in a defined contribution system. The proposals would, however, reduce the risks of severe member harm, as witnessed in Shield and First Guardian, and better equip the prudential framework to respond as investment products, distribution models and member preferences evolve.  APRA’s proposals complement the Government’s proposed broader legislative reforms announced 19 August 2026 following the Shield and First Guardian collapses.

APRA invites written submissions on this discussion paper and the accompanying draft Prudential Standard SPS 530 Investment Governance by 3 February 2027. APRA expects to finalise the standard and release draft prudential guidance in the first half of 2027. Subject to consultation, the new framework is expected to commence on 1 January 2028.

Glossary

Chapter 1: Policy background

Investment governance is central to safeguarding members’ interests

Sound investment governance by trustees is central to preventing member harm and maintaining confidence in the superannuation system. Although members ultimately bear investment risk in a defined contribution system, trustees are responsible for selecting, managing and monitoring investments, whether through a default option, a limited range of choices or an extensive investment menu. Sound investment governance increases the likelihood of good member outcomes, while poor practices can result in significant harm through lower returns or substantial losses.

Trustees already have extensive statutory and prudential obligations. Under the Superannuation Industry (Supervision) Act 1993 (SIS Act), trustees must exercise the degree of care, skill and diligence of a prudent superannuation trustee, act in the best financial interests of members, and comply with the investment and conflicts covenants. APRA’s prudential framework reinforces these obligations by requiring trustees to conduct appropriate due diligence, monitor investments, and take timely action when performance deteriorates or risks emerge.

APRA and ASIC have complementary but distinct roles in overseeing trustees’ investment governance. APRA is the prudential regulator and is responsible for setting standards for trustees to maintain sound investment governance, effective risk controls and appropriate oversight. ASIC is the conduct regulator and is responsible for protecting consumers from harm, market integrity, disclosure and record keeping.

APRA has increased its focus on investment governance, particularly in platform trustees

APRA has had a multi-year focus on investment governance across the superannuation industry. Between 2023 and 2025, APRA undertook thematic reviews of investment governance practices, including liquidity risk, unlisted asset valuations and member outcomes. While this work identified gaps in how some trustees were discharging existing obligations across the whole industry, concerns were most evident in the platform segment.

APRA escalated its supervisory intensity for platform trustees in early 2025 by launching a major thematic review. This review, which covered trustees responsible for 95% of platform assets, identified entity-specific weaknesses requiring remediation. In October 2025, APRA publicly directed platform trustees to accelerate efforts to lift standards relating to onboarding, ongoing monitoring and taking remedial action. APRA’s October 2025 industry letter set clear expectations and noted APRA would take regulatory action to ensure trustees were taking appropriate steps.

APRA has subsequently taken enforcement action against 5 platform trustees, representing almost 30% of APRA-regulated platform assets. APRA’s licence conditions and court enforceable undertaking in relation to these trustees aim to address weaknesses in how those trustees were meeting their investment governance obligations.

Platform business models can make investment governance more challenging

Investment governance risks are most evident in the platform segment because common features of the business model can make investment governance more challenging.

Platform trustees often offer broad investment menus made up of many specific financial products. These menus can be much harder to oversee than a smaller number of trustee-designed, diversified pre-mixed options. Where the size and complexity of the menu is not matched by trustee capability and resources, there is a greater risk that unsuitable options are onboarded, poorly performing options remain available, or emerging risks are not identified and addressed quickly enough.

Platform trustees also commonly rely on advisers, promoters and other third parties to distribute products and support member investment decisions. These arrangements can create conflicts of interest and may weaken trustee oversight if trustees place too much reliance on external parties. The risk is heightened where third parties have a commercial interest in particular investment options remaining available to members.

Members using platforms may also be able to concentrate large parts of their retirement savings in a small number of higher-risk options. This can increase the risk of severe loss if one of those options performs poorly or fails.

These features do not, of themselves, indicate a platform business model is inherently imprudent. However, they do mean platform trustees face heightened investment governance risks and require sufficiently strong governance controls to manage those risks effectively.

Figure 1. Key features and risks of the superannuation platform trustee model

Policy reform is needed to address the remaining risks

While APRA has seen some improvement in response to its supervisory and enforcement activity, APRA’s overall assessment is that material weaknesses remain. APRA’s supervisory work has found that, in many cases, platform trustees have not established governance practices commensurate with the risks inherent in their business models. Some platform trustees have treated investment governance as a compliance exercise rather than a core governance responsibility. This has manifested in a range of recurring weaknesses in investment governance practices, including:

• inadequate enforcement of trustee-determined investment limits, allowing members to concentrate their retirement savings into a small number of high-risk options and increasing their exposure to severe losses;
• weaknesses in the management of conflicts of interest, including conflicts arising from commercial arrangements with advisers, promoters and other third parties;
• a mismatch between the size and complexity of some trustees’ investment menus and the capability and resources to oversee them effectively; and
• limited scrutiny when onboarding investment options, inadequate ongoing monitoring and failures to take timely and effective remedial action where risks or concerns are identified.

APRA has elevated concerns about the platform sector, which has been the focus of intensified enforcement activity. While platform products represent around 15% of APRA-regulated superannuation assets, trustees offering platform products accounted for 70% of announced superannuation enforcement actions in 2025-26. APRA’s concerns occur in the context of the platform sector continuing to grow, with investments via platform products reaching $450 billion in June 2026, up 14% year-on-year.

The deficiencies identified above mean that members are exposed to a heightened risk of poorly performing or excessively concentrated investment options, with potentially severe impacts on their retirement savings. The collapses of Shield and First Guardian illustrate the scale of harm that can occur when members’ funds are highly concentrated in risky investments without effective trustee oversight and safeguards. Almost 12,000 members lost around $1 billion in retirement savings through Shield and First Guardian. Within APRA-regulated funds, losses were spread across 4 affected platform trustees, although 2 trustees subsequently provided compensation for capital losses.

APRA considers that stronger requirements are needed to address these weaknesses. The current investment governance prudential standard is largely principles-based and designed to apply across all business models. In APRA’s view, this approach has not been effective in addressing the risks presented by platforms. APRA therefore proposes to introduce more detailed and prescriptive requirements. These will establish firmer minimum expectations for trustees, strengthen key safeguards for members and provide a stronger basis for supervisory and enforcement intervention where trustees fall short of APRA’s expectations.

APRA is proposing 8 changes to strengthen investment governance. Three proposals are focused on risks that are most evident in the platform segment:

1. Reducing concentration risk — requiring trustees to set and enforce member-level investment limits to reduce the risk of severe member losses from concentrated investments in higher-risk options.
2. Strengthening conflicts management — requiring trustees to better identify, assess and manage conflicts involving promoters, advisers and other third parties.
3. Aligning trustee capability with investment offerings — requiring trustees to ensure their resources and capability are commensurate with the size, complexity and nature of their investment menus.

APRA is also proposing 5 supporting changes to investment onboarding, monitoring, remediation, valuations and accountability requirements. They would largely translate expectations APRA has already communicated to industry into firmer obligations, supporting stronger supervision and enforcement where weaknesses persist. In some of these areas, particularly in relation to remediation, APRA has strengthened expectations in response to continuing deficiencies.

The proposals preserve meaningful choice but strengthen safeguards

The proposals would apply to all trustees because the underlying prudential principles are relevant across the whole industry, particularly given the superannuation investment landscape is evolving with member-directed investment becoming more prevalent. However, they are expected to have greatest impact on platform trustees, where APRA has observed heightened risks and persistent weaknesses in investment governance practices. In practice, trustees with robust investment governance frameworks and practices are not expected to be materially affected.

Introducing stronger and more prescriptive investment governance requirements involves trade-offs. This is most apparent in relation to member-level investment limits. APRA has sought to balance competing considerations, including the degree of discretion trustees should retain in managing investment risks and the extent to which prudential requirements should constrain member choice. While APRA recognises the benefits of principles-based regulation, that approach has not been effective in this area. APRA therefore considers a more prescriptive approach is justified given the potential for severe member harm where investment governance fails, particularly given existing trustee safeguards have not consistently addressed the risks they were intended to manage.

APRA recognises that investment limits provide guardrails that limit choice and are not a substitute for sound due diligence, monitoring and remediation. However, they can significantly limit the severity of member harm where other controls prove insufficient. They would help protect members, support confidence in the superannuation industry, and limit the amount industry may ultimately need to contribute to compensation where failures occur.

APRA’s work will complement the Government’s broader reforms

APRA’s proposals complement the Government’s broader reforms and form part of a coordinated response to strengthen safeguards and reduce the risk and severity of member harm. On 19 August 2026, the Government announced a package of reforms to strengthen consumer protections in the superannuation system in response to the collapses of Shield and First Guardian. The proposed compensation scheme would reinforce APRA’s proposals by strengthening incentives for trustees to improve investment governance.

Chapter 2: Stronger safeguards

This chapter sets out 3 proposals to strengthen the controls around risks that are most evident in the platform segment. The proposals focus on reducing concentration risk, strengthening conflicts management and aligning trustee capability and resources with the complexity of investment offerings.

Current requirements

The SIS Act and SPS 530 require trustees to formulate an investment strategy for each investment option that has regard to a range of factors, including risk and return and to ensure the investment options offered to members allow adequate diversification. APRA’s guidance in Prudential Practice Guide SPG 530 Investment Governance (SPG 530) reinforces the importance of diversification and sets expectations for trustees to be able to demonstrate how each investment option (including single asset class options) achieves diversification by examining its risk profile.

These requirements support the prudent design and oversight of individual investment options, particularly diversified pre-mixed options set by the trustee. However, they do not directly address the risk that members may concentrate too much of their balance in a small number of options, particularly higher-risk options.

Problem statement

Although members ultimately bear investment risk in a defined contribution system, trustees are responsible for the investment options they make available and the controls that apply to those options. In platform models, members can often allocate a large share of their retirement savings to a single investment or small number of higher-risk options.

This creates a different risk from ordinary market losses. Members invested in diversified options can experience significant losses, especially during economic downturns, but diversification reduces the likelihood that the failure or material underperformance of a single investment will cause severe and permanent loss. By contrast, concentrated exposure to a single higher-risk option can leave members vulnerable to large losses if that option fails or materially underperforms. Given superannuation is a major source of retirement income for many Australians, these losses can have lasting implications for a member’s financial security.

The risk is amplified where investment decisions are influenced by advisers, promoters or other third parties with commercial interests in particular products being included or retained on the menu. In those circumstances, conflicts of interest may weaken trustee challenge and make it more likely that members are directed into higher-risk options in ways that are inconsistent with prudent investment governance.

The prudential concern is not limited to any particular product type or recent failure. It can arise wherever members are able to concentrate a large proportion of their retirement savings in less diversified higher-risk options with features such as limited liquidity, leverage, opaque or complex structures, heightened counterparty risk, or governance and conflict risks (“concentrated higher-risk options”).

Many platform trustees already recognise this type of concentration risk by applying member-level investment limits. However, APRA’s supervisory work has found these limits are not always enforced effectively. For example, because trustees do not sufficiently monitor limits or undertake the requisite validation to ensure compliance.

The failure of Shield and First Guardian has illustrated the scale of harm that can arise when members have excessive exposure to concentrated higher-risk options and trustee controls are not sufficiently strong. Member-level investment limits would not have prevented those collapses or eliminated all losses. However, when properly designed and enforced, they can provide important guardrails that limit excessive exposure to a single higher-risk option and reduce the scale of member harm where other controls fail.

APRA recognises that member choice is an important feature of the superannuation system. Investment limits are not intended to prevent members from accessing higher-risk investments. Members will continue to bear significant investment risk, as appropriate in a defined contribution system. However, member-level investment limits reduce the risks of severe member harm by limiting excessive exposure to concentrated higher-risk options and better equip the prudential framework to respond as investment products, distribution models and member preferences evolve.

The proposal and supporting guidance

To strengthen existing industry practice, APRA proposes to amend SPS 530 to require trustees to set and enforce member-level investment limits where members can directly choose specific investments. The limits would apply at the point a member acquires an investment or makes an additional contribution to it. In practice, this means trustees would restrict acquisitions or additional contributions that would cause a member’s exposure to exceed the applicable limit, rather than requiring members to sell down existing holdings. The objective is to reduce the risk of severe member losses from excessive exposure to concentrated higher-risk options.

APRA recognises that an industry-wide member-level investment limit involves trade-offs. The choice sector includes more than 50,000 products, ranging from very low risk to very high risk, offered through many different investment structures.

Striking a balance

APRA has therefore designed the proposal around 4 principles:

• Principles-based, but subject to strong safeguards: trustees should retain judgement to assess the characteristics and risks of different investment options and set appropriate limits based on their membership base. However, APRA considers that strong safeguards are needed otherwise members may remain exposed to severe losses if trustees set inappropriate limits, do not enforce them, or allow broad exceptions.
• Targets concentration risk while preserving meaningful choice: limits should focus on options where concentrated exposure could cause severe member loss to avoid unnecessary restrictions. They should not restrict investment in low-risk assets or well-diversified options. Limits should also still allow for appropriate exposure to concentrated higher-risk options to preserve meaningful choice, particularly given investments in these options can deliver broader economic benefits.
• Risk-based, but simple: options should be grouped based on their risk and diversification, but the approach should remain simple and practical. A complex quantitative model prescribed by APRA would increase regulatory costs and reduce trustee flexibility.
• Regulatory neutral: the proposal should target underlying risk, not the type of vehicle used. Similar risks can sit in different structures, so vehicle-based rules could create economic distortions and arbitrage opportunities.

APRA proposes a two-part approach to member-level investment limits. Trustees would be required to set and enforce appropriate limits for concentrated higher-risk options, subject to a maximum limit set by APRA.

Concentrated higher-risk options would be determined by exception. Specifically, the requirement would apply unless the trustee is positively satisfied that an option is lower risk. This would generally mean the option is highly liquid, does not use significant leverage, is highly diversified or otherwise low risk, and involves a well-established and well-capitalised counterparty (typical examples APRA expects to satisfy this test are below). In applying this test, trustees could not rely on face value information from product issuers. They would have regard to the underlying characteristics and risks of the investment rather than rely solely on product labels, stated investment objectives or historical performance. This is consistent with Proposal 4 which makes clear APRA expects a degree of look-through, particularly for options with more opaque investments.

Options that do not meet the exclusion test would be treated as concentrated higher-risk options. For these higher-risk options, trustees would be required to determine and enforce an appropriate member-level investment limit, having regard to the option’s risk profile, including liquidity risk and the level of diversification.

Trustee-set limits would be subject to an APRA limit. APRA’s preliminary view is that a maximum limit of 20 to 30% for each option, or group of options, may be appropriate but welcomes feedback on the calibration. APRA would expect trustees to set limits below the maximum in many cases, particularly for illiquid options, such as private credit, or undiversified options, such as a single ASX 300 security. The maximum limit would generally be more appropriate for options that are moderately diversified and liquid, such as a moderately diversified equity fund.

Overall, APRA’s judgment is that this two-part approach would strike the best balance between reducing the risk of severe member harm from excessive exposure to concentrated higher-risk options, while preserving meaningful member choice and allowing trustees to exercise judgement in setting member-level investment limits. Additional prescription would unnecessarily restrict choice by capturing low risk or well-diversified options. Conversely, less prescription would risk members having excessive exposures to options like in the circumstances seen in the Shield and First Guardian collapses.

Important design features

Under APRA’s proposed approach, trustees would need to monitor and enforce these limits on an ongoing basis. However, as noted earlier, the limits are intended to restrict further contributions. Trustees would not generally require members to sell down existing investments where a limit is exceeded because of market movements. APRA guidance would make clear that trustees would be expected to periodically notify affected members where a limit is materially and persistently exceeded and explain the options available to manage their exposure.

The proposal would apply regardless of whether a member is advised or unadvised. APRA recognises that financial advisers can play an important role in helping members make informed investment decisions. The proposed calibration would continue to allow advisers to recommend exposure to concentrated higher-risk options where appropriate, but within limits designed to prevent excessive concentration in a single option.

APRA does not consider that advised members should be exempt. Advice may support a member’s decision-making, but it does not remove the trustee’s responsibility for the investment menu or the controls that apply to it. Exempting advised members would significantly weaken the effectiveness of the requirement and could create an incentive for concentrated exposures to be channelled through advice arrangements, even where the underlying prudential risk is similar.

This is particularly important in platform models, where adviser and promoter relationships can give rise to conflicts or commercial pressures that influence which products are made available and retained on menus. Trustees should not rely on the existence of advice as a substitute for their own risk controls or ongoing accountability for the investment options they offer.

Seeking feedback

APRA welcomes feedback on whether the proposed approach to member-level investment limits strikes the right balance between reducing severe member harm and preserving meaningful choice. APRA is particularly interested in views on which options should be treated as higher-risk, which options should be excluded, and what guidance APRA could provide to ensure the proposed test is implemented in a consistent and proportionate way.

A key area where APRA intends to provide more detailed guidance is the circumstances in which an option would meet the ‘highly diversified’ test. For example, APRA could clarify that an option would generally need to have more than 100 underlying securities. APRA could also identify options that would not generally meet the test, such as single-sector, commodity-themed or alternative investment options. APRA recognises that the distinction between highly diversified and less diversified options is not always clear-cut and welcomes feedback on how this distinction should be applied in practice.

APRA welcomes views on other potential implementation challenges and risks, including whether trustees should be required to aggregate a member’s exposure across concentrated higher-risk options to minimise the risk of avoidance, the costs and benefits of doing so and what trustees should do in the event limits are breached due to market movements or reinvestment.

This proposal would reduce the risk of severe member losses arising from excessive exposure to concentrated higher-risk options, while preserving meaningful investment choice. It would also work alongside the proposed onboarding and monitoring requirements, so higher-risk options are subject to stronger trustee scrutiny and appropriate member-level limits.

Current requirements

Part 6 of the SIS Act requires trustees, among other things, to give priority to the duties to and interests of members where conflicts of interest or duty arise. Prudential Standard SPS 521 Conflicts of Interest (SPS 521)2 supports these obligations by requiring trustees to maintain a Board-approved conflicts management framework to identify, avoid and prudently manage actual and potential conflicts of interest and duty across their business operations. This includes maintaining a conflicts management policy, registers of relevant duties and interests, and processes to identify, manage and regularly review conflicts. Prudential Practice Guide SPG 521 Conflicts of Interest (SPG 521) provides guidance on prudent practices for complying with these requirements.

These requirements operate to clearly position members’ interests as the trustee’s priority, but in practice the impact of conflicts is not always adequately assessed and considered by trustees when making investment decisions.

Problem statement

APRA continues to observe persistent weaknesses in how some platform trustees identify, assess and manage conflicts arising from third parties with an interest in the decisions made by the trustee. While trustees are subject to existing conflicts management obligations, they do not always adequately assess how the commercial interests of promoters, advisers, dealer groups and other parties may influence investment decisions. Poor management of these conflicts can weaken trustee decision-making and investment oversight, exposing members to expensive, underperforming or unsuitable options.

These conflicts can create pressure to keep investment options available even where there are concerns about their performance, risk or suitability. The risk to members is greater where advisers, promoters or related parties have a direct or indirect financial interest in an option remaining on the menu, and the trustee does not take timely and effective action to address emerging concerns.

The proposal and supporting guidance

To strengthen trustee oversight of promoters, financial advisers and other third parties involved in recommending investments, APRA proposes to require trustees to identify and assess conflicts of the parties they deal with on an ongoing basis. Where such conflicts are identified, trustees would be required to either avoid the arrangement or demonstrate how the conflict is being effectively managed. The proposal is intended to build on existing conflicts management requirements by making it more explicit that trustees must consider not only conflicts within their own operations, but also conflicts of third parties they deal with.

APRA also proposes to clarify in guidance that some conflicts of third parties that trustees deal with are not capable of being managed and should therefore be avoided. APRA’s guidance would outline the expectation that trustees avoid arrangements where a promoter, dealer group or financial adviser has a direct or indirect financial interest in an investment option offered to members, or in an investment included in that option.3 This may arise, for example, where an adviser or promoter introduces new members to a fund on the condition that particular investment options are included on the menu. This type of conflict should generally be avoided, given the risk that the third party’s commercial interests may influence trustee decision-making.

APRA’s guidance would also set out expectations for how trustees should identify and assess conflicts involving third parties. This would include monitoring whether promoters and dealer groups are operating in a way that meets the trustee’s expectations and supports the trustee to meet its duties to members. It would also include considering whether financial advisers have appropriate systems in place to meet their own legal obligations. Trustees would also be expected to monitor unusual adviser-related flows as part of their ongoing conflicts assessment.

Guidance would also reinforce that trustees are ultimately responsible for investment decisions about onboarding, monitoring and retaining investments or investment options. Trustees are required to prioritise the interests of members and, in doing so, APRA expects trustees to make decisions independently based on their own assessment of performance, risk and suitability for members, even where this conflicts with the preferences of promoters, advisers or other third parties. For example, where a promoter or adviser argues that an option should remain available, the trustee should give priority to its own assessment of the option rather than the commercial interests of the promoter or adviser.

This proposal would complement APRA’s recent consultation on new conflicts management requirements in Prudential Standard CPS 510 Governance (CPS 510), which would replace SPS 521 and strengthen trustees’ conflicts management practices.

Together, these changes would help ensure trustees identify and manage conflicts involving the third parties they deal with and give priority to members’ interests in practice. Some trustees may need to invest in stronger controls, particularly where they rely heavily on promoters, advisers or other third parties. APRA considers these costs proportionate to the benefits of stronger trustee accountability and safeguards for members’ interests.

Current requirements

The investment covenant in section 52(6) of the SIS Act and SPS 530 require trustees to set investment strategies and objectives for each investment option that have regard to a wide range of factors. In fulfilling these obligations, trustees are required to undertake appropriate due diligence, ongoing monitoring and timely action to ensure investment options remain suitable for members. The effectiveness of these arrangements in practice depends on trustees maintaining sufficient resources, skills and oversight to support the size and complexity of their investment offerings.

Problem statement

Some platform trustees continue to offer very large investment menus but do not have the resources, capability or systems needed to oversee those menus effectively. Where investment options are added or retained without considering the overall size and complexity of the menu, menus can become too large to govern well. This increases the risk that poor-quality options are made available to members, or that performance and emerging risks are not monitored effectively.

APRA has also observed that some trustees rely heavily on third parties to support investment onboarding, monitoring and oversight. This can limit the trustee’s ability to independently assess, challenge and respond to risks. Trustees may engage external parties to support investment governance, but they cannot outsource accountability for it. Where a trustee lacks sufficient internal capability to oversee external parties and test their advice or recommendations, it is unlikely to be meeting the requirements of SPS 530.

The proposal and supporting guidance

APRA proposes to require trustees to set and regularly review limits on the size, complexity and nature of their investment menus. These limits would help ensure trustees only offer investment menus they have the capability, resources and governance arrangements to oversee effectively. APRA expects some trustees will need to uplift their capability, simplify their menus, or do both due to this requirement. This reflects APRA’s view that trustees are ultimately accountable for the investment menu made available to members.

As part of setting limits, APRA guidance would outline prudent approaches to undertaking this assessment, including that APRA would expect trustees to consider expectations relating to undertaking effective due diligence and monitoring investments and effectively overseeing third parties including investment managers, promoters and advisers.

Trustees may use external investment managers, advisers and consultants to support investment activities. However, they remain accountable for prudent investment oversight and investment outcomes. Trustees must maintain enough internal capability and information to independently assess, challenge and act on external advice and recommendations.

The level of resources needed will depend on the trustee’s business model and investment offering. For example, overseeing pooled trusts or separately managed mandates may require different capability and oversight arrangements from direct exposure to a private credit fund or unlisted real estate investment.

This proposal would supplement existing prudential requirements on outsourcing and service providers involved in investment management.

The proposal would reduce the risk of member harm from investment menus that are too large or complex for trustees to oversee effectively. Some trustees may need to invest in additional capability, improve systems or simplify their investment offerings. APRA considers these costs proportionate to the benefits of stronger trustee oversight and reduced risk of member harm.

Chapter 3: Codifying prudent practice

This chapter sets out 5 proposals that largely codify APRA’s existing expectations for prudent investment governance. These expectations have largely been communicated through APRA’s supervision activities and the 2025 industry letter. In some of these areas, particularly in relation to remediation, APRA has strengthened expectations given the persistence of the issues. APRA is also proposing minor drafting changes to SPS 530 to make clear that all trustees must comply with the standard, regardless of their business model or whether investment management is performed internally or by external parties.

These proposals are expected to have limited impact on trustees that already maintain strong investment governance practices.

Current requirements

A fundamental obligation of trustees under SPS 530 is to ensure that investment selection is subject to effective due diligence which is commensurate with the nature and characteristics of the investment. A trustee must ensure that it has sufficient understanding and knowledge of a proposed investment, including how the proposed investment is expected to perform under a range of stress scenarios and be satisfied that the investment is appropriate.

SPS 530 is principles-based and does not prescribe detailed requirements on what constitutes effective due diligence. While SPG 530 provides further guidance on APRA’s expectations, trustees adopt different approaches to their due diligence frameworks, risk assessments and investment onboarding and selection criteria.

Problem statement

Effective onboarding helps prevent unsuitable or poor-quality investments from being offered to members. APRA’s 2025 industry letter identified weaknesses in platform trustees’ onboarding practices, including inconsistent due diligence, limited internal analysis, over-reliance on external research, weak assessment of conflicts and unclear selection criteria.

The proposal and supporting guidance

APRA proposes to expand requirements in SPS 530 so that investments are only made available to members after robust due diligence and objective assessment against clear criteria. The core principle is that trustees remain accountable for the investments made available to members, regardless of their business model or reliance on external parties.

Under the proposal, trustees would need to set, document and apply acceptance thresholds covering key risk and performance matters, including fees, liquidity, valuations, stress testing, governance, external information and conflicts.

Where trustees rely on external investment managers, the proposed requirements also are intended to ensure trustees receive information of sufficient quality and depth to assess all relevant aspects of risk and performance, and to determine whether the investment remains consistent with trustee expectations.

APRA would support these requirements with guidance on how trustees should calibrate acceptance thresholds and tailor due diligence given that a trustee’s approach will vary depending on the type of investment and investment vehicle. APRA would expect heightened due diligence for investments where a trustee may have limited ability to remove the investment option or take remedial action, for example because the investments underlying the option are illiquid. Further, for externally managed investments, APRA would expect a greater degree of examination and look-through for an unlisted managed investment scheme than a listed ETF where the underlying investments are highly transparent.

These changes would make onboarding more consistent and reduce the risk that unsuitable or poor-quality investments are offered to members. As the proposal largely codifies existing expectations, costs are expected to be concentrated among trustees that need to uplift weaker practices.

Current requirements

SPS 530 already requires trustees to monitor investments on an ongoing basis, including against appropriate performance measures and benchmarks, and to report regularly to the Board. SPG 530 provides further guidance, including that performance and risk outcomes should generally be reported to the Board at least quarterly. However, trustees retain flexibility in how they design and apply their monitoring frameworks.

Problem statement

Effective monitoring helps trustees identify poor performance or emerging risks before members are harmed. APRA’s platform review found weaknesses in some trustees’ monitoring practices, including inconsistent monitoring, weak thresholds, incomplete watchlist criteria, limited liquidity triggers and over-reliance on external ratings.

These weaknesses increase the risk that trustees do not identify or address investment deterioration early enough.

The proposal and supporting guidance

APRA proposes to require trustees to monitor investments against the same key risk and performance measures used for onboarding. Trustees would also need to monitor matters that may affect ongoing suitability, such as changes in investment strategy, governance concerns, negative news, unusual fund or adviser-related flows and other emerging risks.

APRA would support this with guidance on how trustees should establish, maintain and report on investment watchlists.

These changes would help trustees identify emerging risks, performance deterioration and governance concerns earlier and more consistently. Given the proposal largely codifies existing expectations, implementation impacts should be limited for trustees with sound monitoring practices.

Current requirements

SPS 530 sets out high-level requirements for reviewing investment strategies and taking action when concerns arise. These include requirements for the Board of an RSE licensee to monitor whether investment objectives are being met, take appropriate and timely action in response to investment matters, and ensure investment strategies are subject to regular review.

Problem statement

APRA has continued to observe persistent issues in relation to remediation practices. Trustees do not always act quickly or effectively when an investment option underperforms or moves outside risk tolerances, particularly platform trustees. This can leave members exposed to harm.

In some cases, remediation is delayed. In others, underperforming options are closed to new members or new contributions, but existing members remain invested for extended periods without a clear pathway to resolution. Delays can be made worse where trustees place too much weight on maintaining adviser or promoter support, creating a bias towards retaining options despite concerns about their performance or suitability. These practices can leave members exposed to prolonged underperformance or heightened investment risk after concerns have already been identified by the trustee.

APRA has also observed weaknesses in remediation processes, including unclear responsibilities, poor documentation, subjective recommendations that favour retaining options, and a lack of trustee-led frameworks for responding to underperformance or third-party recommendations. In some cases, tax considerations have unduly contributed to delayed action, leaving members in underperforming options for longer than is appropriate.

The proposal and supporting guidance

APRA proposes to strengthen SPS 530 by setting clearer requirements for escalation and remediation where investments no longer meet trustee-established criteria. Trustees would be required to take appropriate, time-bound action when an investment option or underlying investment underperforms, breaches risk thresholds or otherwise raises material concerns. This action could include reviewing or adjusting member-level investment limits, removing an investment or investment option, transitioning members to another option and communicating actions or proposed actions to members.

Reflecting the persistent shortcomings APRA continues to observe in remediation practices, trustees would also be required to obtain active member consent where members remain invested in an option that is subject to material or persistent performance or risk concerns. This requirement is intended to strengthen remediation outcomes by ensuring that trustees inform members of those concerns and members make an active decision to remain invested, rather than trustees allowing members to remain invested by default.

APRA would support these requirements with guidance on how trustees should use tolerances, triggers and escalation points to identify underperformance and emerging risks. Guidance would also set expectations for suitable timeframes for action, and for trustees to document their escalation and remediation framework in advance.

APRA would not generally expect investments to remain on a watchlist for prolonged periods without a clear pathway to resolution. Guidance would make clear that trustees should consider performance, fees, tax and other factors affecting net outcomes. Tax considerations would not generally justify delaying action unless the trustee has clearly documented why the tax impact outweighs other risks, including the risk of capital loss or prolonged underperformance.

APRA is also considering whether trustees should report to APRA on investments that remain on a watchlist for more than 12 months and welcomes feedback on this potential reporting requirement.

This proposal would strengthen accountability while preserving trustee discretion on the appropriate response. It is intended to support earlier and more consistent intervention, so members are not left exposed to underperforming options or options that breach trustee-set risk limits. Some trustees will need to uplift remediation capabilities because of these requirements. APRA considers these impacts proportionate given the limited progress some trustees have made in addressing identified remediation weaknesses and the resulting risk of member harm arising from delayed or ineffective action.

Current requirements

SPS 530 requires a trustee to have an appropriate valuation governance framework as part of its investment governance framework. This must include a Board-approved valuation policy covering valuation methodologies, reporting, valuation frequency, interim valuations and triggers, the circumstances in which independent external valuations are obtained, and processes for validating, challenging and escalating valuations.

SPG 530 sets out APRA’s expectation that the valuation governance framework would be subject to robust assessment and oversight by the Board, senior management and internal and external audit and has regard to valuer expertise, currency of valuation and equity to members.

Problem statement

Reliable valuations are essential to sound investment decisions, member equity and confidence in outcomes. They support decisions about onboarding, monitoring, retaining or disposing of investments.

APRA has identified weaknesses in valuation practices, particularly for unlisted and hard-to-value assets. These include over-reliance on manager-provided valuations, limited independent challenge, unclear triggers for interim revaluations and poor trustee visibility of downstream valuation processes.

Where valuations are stale, or valuation governance processes are not robust, trustees do not have adequate information to support effective investment decision making. There is also the risk of inequitable outcomes for members especially during periods of market volatility.

APRA will shortly require selected large trustees to appoint an independent party to undertake a deep-dive review of their valuation governance practices for unlisted assets, as outlined in APRA’s 2026–27 Corporate Plan.

The proposal and supporting guidance

APRA proposes to require investment valuations to be undertaken at least quarterly. APRA also proposes to make clear that it may direct a trustee to obtain an external valuation where APRA has concerns about the reliability of a valuation and considers an independent valuation would be in members’ interests. Lastly, APRA proposes minor amendments to valuation policy requirements in SPS 530 which embed expectations from APRA’s December 2024 Information Paper.

APRA will assess the need to support these requirements with further guidance on trustee-led valuation, informed by its upcoming review and ongoing supervisory activity. APRA intends to consider whether further guidance is needed to clarify the trustee’s role to review, challenge and gather evidence where valuations are prepared by investment managers or related parties.

Enhancements would continue to support more reliable and timely valuations. Implementation costs for this proposal are expected to be proportionate given the impact will largely apply to trustees with weaker valuation practices.

Current requirements

Trustees are required to meet a range of legislative and prudential obligations to support the prudent and effective investment of fund assets. This includes the investment covenant in section 52(6) of the SIS Act, SPS 530 and the obligations of the Financial Accountability Regime Act 2023 (FAR).

Problem statement

APRA has observed that some trustees place a high level of passive reliance on the practices of external parties including promoters and financial advisers who carry out investment functions of the fund. Given complex governance arrangements and numerous third parties involved in the investment of member assets, it is important that trustees have a clear line of sight over their investment responsibilities and functions. Trustees have ultimate accountability for the investments made on behalf of their members and it is important that this accountability is active and appropriately verified.

The proposal and supporting guidance

Complementing existing accountability frameworks, including FAR, APRA proposes to require an annual attestation of compliance with legislative and prudential requirements relating to investment governance to be completed by the accountable person for the RSE licensee’s investment function under FAR. This attestation would cover the adequacy of the RSE licensee’s investment governance arrangements and processes. APRA would expect the assessment to support the attestation to be consistent with trustees’ risk appetite statement and delegation framework.

To further strengthen accountability for investment governance, APRA also proposes to require the RSE licensee to have regard to the attestation when determining variable remuneration.

The proposal would strengthen accountability and provide greater assurance that investment governance arrangements remain effective and aligned with trustees’ obligations to members.

Chapter 4: Consultation

Request for submissions

APRA invites written submissions in response to this discussion paper and the accompanying draft prudential standard, including views on the policy proposals and consultation questions. They should be sent to PolicyDevelopment@apra.gov.au by 3 February 2027 and addressed to:

General Manager
Policy Development
Policy and Advice Division
Australian Prudential Regulation Authority

Important disclosure information

All information in submissions will be made available to the public on the APRA website unless a respondent expressly requests that all or part of the submission is to remain in confidence. Automatically generated confidentiality statements in emails do not suffice for this purpose.

Respondents who would like part of their submission to remain in confidence should provide this information marked as confidential in a separate attachment.

Submissions may be the subject of a request for access made under the Freedom of Information Act 1982 (FOIA). APRA will determine such requests, if any, in accordance with the provisions of the FOIA. Information in the submission about any APRA-regulated entity that is not in the public domain and that is identified as confidential will be protected by section 56 of the Australian Prudential Regulation Authority Act 1998 and will therefore be exempt from production under the FOIA.

Discussion paper questions