Document ID: chunk:federal_register_of_legislation:F2023L01348:reg:17:p1
Version: federal_register_of_legislation:F2023L01348
Segment Type: reg
Provision Reference: reg 17 (pt 1/6)
Character Range: 49112–52521

17                                 Total
                                   (sum of rows 1 + 5 + 9 + 13)

B. Requirements for Non-SFIs

Remuneration framework
74.         An APRA-regulated entity must maintain a remuneration framework that:
(a)          aligns with the entity's business plan, strategic objectives and risk management framework;[22]
(b)          promotes effective management of both financial and non-financial risks, sustainable performance and the entity's long-term soundness;
(c)          for an RSE licensee, promotes performing its duties and exercising its powers in the best financial interests of beneficiaries; and
(d)          supports the prevention and mitigation of conduct risk.
75.         The remuneration framework must include a documented remuneration policy which at minimum sets out:
(a)          how the remuneration framework addresses paragraph 74 of this Prudential Standard;
(b)          at a high level, the structure and terms of remuneration arrangements that apply to a person who is:
(i)            employed directly by the APRA-regulated entity;
(ii)         retained directly by the APRA-regulated entity under contract; and
(iii)       employed by, or is a contractor of a body corporate (including a service company) that is a related body corporate or connected entity, of the APRA-regulated entity;
(c)          the approach to identify and mitigate material conflicts to the objectives of the remuneration framework, as specified in paragraph 74 of this Prudential Standard, that may result from third-party service provider compensation arrangements; and
(d)          the systems and processes that support the implementation of the entity's remuneration arrangements, including those that cover the assessment and management of performance, conduct and consequences.

Role of the Board
76.         The Board, or relevant oversight function, of an APRA-regulated entity is ultimately responsible for the entity's remuneration framework and its effective application.
77.         The Board, or relevant oversight function, must approve the remuneration policy required under paragraph 75 of this Prudential Standard.

Remuneration design
78.         An APRA-regulated entity must design all variable remuneration arrangements to align with paragraph 74 of this Prudential Standard and must incorporate in its variable remuneration arrangements:
(a)          financial and non-financial risks that could materially impact the entity's risk profile, sustainable performance, long-term soundness, and in addition for an RSE licensee, those risks that could materially impact on performing its duties and exercising its powers in the best financial interests of beneficiaries;
       (b)          payout and vesting schedules that are commensurate with the possible range of risk and performance outcomes and that are sensitive to the time horizon of risk; and
       (c)          appropriate variable remuneration adjustment tools, that include but are not limited to overriding board discretion at each decision point, in-period adjustments, malus and, where appropriate, clawback, which are supported by a downward-adjustments process:
(i)            with clearly identified triggers to make a downward-adjustment;
(ii)         that determines the appropriate adjustment tools to use; and
(iii)       that determines the amount of downward-adjustment,