Document ID: chunk:federal_register_of_legislation:F2023L01348:reg:17:p2
Version: federal_register_of_legislation:F2023L01348
Segment Type: reg
Provision Reference: reg 17 (pt 2/6)
Character Range: 52188–55503

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, proportionate to the severity of risk and conduct outcomes, to nil if appropriate.
79.         An APRA-regulated entity must subject a person's variable remuneration arrangement to malus.
80.         An APRA-regulated entity must set specific criteria for the application of variable remuneration adjustment tools, including at least the following:
(a)          misconduct leading to significant adverse outcomes;
(b)          a significant failure of financial or non-financial risk management;
(c)          a significant failure or breach of accountability, fitness and propriety, or compliance obligations;
(d)          a significant error or a significant misstatement of criteria on which the variable remuneration determination was based; and
(e)          significant adverse outcomes for customers, beneficiaries or counterparties.
81.         An APRA-regulated entity must take reasonable steps to appropriately adjust variable remuneration downwards when, as a minimum, any of the criteria specified in paragraph 80 are satisfied. The total downward-adjustment to variable remuneration must be proportionate to the severity of the risk and conduct outcome.
82.         In circumstances involving a person under investigation for criteria specified in paragraph 80, variable remuneration must not vest until the investigation is closed.
83.         An APRA-regulated entity must take appropriate steps to assess and mitigate conflicts of interest in the design of its remuneration arrangements, including conflicts that may arise from service contracts.
84.         Despite paragraph 4, a foreign ADI, Category C insurer or EFLIC with total assets in excess of the threshold set out in the definition of SFI under APS 001, GPS 001 or LPS 001 respectively must defer variable remuneration of highly-paid material risk-takers in accordance with paragraphs 41(c), 42 and 43 of this Prudential Standard.

Remuneration outcomes
85.         An APRA-regulated entity must:
(a)          align variable remuneration outcomes with performance and risk outcomes; and
(b)          reflect the appropriate application of variable remuneration adjustment tools in variable remuneration outcomes, as specified in paragraph 78(c) of this Prudential Standard.
86.         An APRA-regulated entity must not accelerate the vesting of unvested variable remuneration for a person in a specified role no longer employed or engaged by the entity, unless specific exceptions[23] have been included in the remuneration policy. If that person is eligible for any unvested variable remuneration, it must be subject to the same vesting conditions as those for a person employed or engaged by the entity.

Specified roles
87.         The Board, or relevant oversight function, must approve the variable remuneration outcomes for persons in specified roles as follows:
(a)          individually for senior managers and executive directors;[24] and
(b)          on a cohort basis for highly-paid material