Key takeaways

The financial services sector is witness to twin-regulatory interventions as Diversa Trustees face intense scrutiny from both APRA and ASIC.

• The financial services sector is witness to twin-regulatory interventions as Diversa Trustees face intense scrutiny from both APRA and ASIC.
• In June 2026, the Australian Prudential Regulation Authority (APRA) commenced a formal investigation into Diversa Trustees Limited (Diversa) over its executive remuneration decision-making framework.
• The investigation focuses on whether executive pay decisions violated prudential standards and the ‘best financial interests’ duty of the Trustees under the Superannuation Industry (Supervision) Act (SIS Act).
• Concurrently, the Australian Securities and Investments Commission (ASIC) is pursuing civil penalty proceedings against the Trustee for its oversight failures in relation to the collapse of the $446m First Guardian Master Fund.

Remuneration committee chairs will want to understand whether their incentive frameworks have a robust, consequence management framework capable of withholding incentives when there are systemic operational breakdowns.

Why does the APRA investigation into Diversa matter?

The joint regulatory action against Diversa marks a definitive shift in how executive remuneration is supervised within Australia’s financial services sector. While corporate watchdogs frequently penalise operational failures, APRA has launched a targeted investigation into Diversa’s executive remuneration decision-making and processes.

Ordinarily, APRA’s supervision teams would consider the remuneration framework and its outcomes as part of routine supervisory activities. But this is the first time we are seeing APRA advise the market it is carrying out a targeted investigation like this. APRA is sending a message to the market!

This investigation is not seeking to establish direct fault for member investment losses  from the collapse of First Guardian. That matter is the subject of ASIC’s current proceedings against Diversa in the Federal Court. Instead, APRA is evaluating whether Diversa has complied with prudential standard CPS 511 and its obligations under the Superannuation Industry (Supervision) Act 1993 (SIS Act).

APRA’s investigation is a major enforcement case study on the alignment of executive payouts with systemic risk outcomes.

What is Diversa’s core remuneration governance failure?

The primary concern is the misalignment between executive pay outcomes and actual member outcomes. Diversa’s leadership received substantial incentive pay, including a $777,000 incentive payment to the CEO, notwithstanding the unfolding crises within Diversa’s platform investment options.

APRA Chair John Lonsdale has explicitly stated that prudent remuneration practices must drive sound risk management and reinforce accountability. APRA’s scrutiny will focus heavily on how Diversa’s board justified making incentive payments (while simultaneously applying to the Federal Government for a $239m bailout to compensate fund investors for the First Guardian collapse) and the variable remuneration design, which must incorporate risks that could materially impact member outcomes.

How does the ASIC lawsuit intersect with APRA’s investigation?

To understand why APRA stepped in, the executive pay framework must be viewed alongside the ongoing ASIC lawsuit and the licence conditions imposed by APRA in December 2025. APRA identified concerns relating to the rigor and due diligence undertaken for new investment options along with ongoing monitoring. ASIC alleges that Diversa failed in its basic gatekeeper responsibilities.

Diversa has defended its position by arguing it was the victim of third-party fraud, filing cross-claims against platform providers like Praemium to share the civil liability. However, from a remuneration perspective, the ultimate source of the collapse is secondary. It would appear that the critical governance failure lies in the fact that a material risk event occurred, and yet internal board mechanisms failed to automatically trigger malus or clawback adjustments to executive pay.

APRA is focused on its prudential standard, CPS 511, that requires a trustee, like Diversa, to maintain a remuneration framework that promotes performing its duties and exercising its powers in the best financial interests of beneficiaries and supports the prevention and mitigation of conduct risk.

What this means for APRA regulated boards

This dual-regulatory intervention reiterates that executive pay cannot be insulated from operational or risk management breakdowns impacting end customers. That is, executive pay cannot prioritise shareholder returns over a trust’s super fund members.

Boards cannot rely only on discretionary adjustments to manage executive accountability. While the remuneration policy of APRA-regulated entities must specify the systems and processes that cover the assessment and management of performance, conduct and consequences (CPS511 para 22(d)), it is a prudent measure for all companies.

Remuneration committees would be well-served to ensure clear and objective consequence management frameworks (CMF) that enable adjustment of variable reward outcomes for risk, operational and systems failures. Such a framework ensures that executive pay outcomes directly mirror the financial realities of the members/shareholders and stakeholders they serve.

It is standard procedure for APRA or other regulators like ASIC, ATO etc  to investigate and penalise operational or governance failures. What makes investigation into Diversa notable is APRA’s decision to make it public. Although we may not know the reason why,  it is a clear warning for what might happen when there is a mismatch between pay and performance.

What should Remuneration Committee chairs do next?

CPS 511 came into force from 1 January 2024.

Board Remuneration Committees of APRA-regulated entities are now on notice – APRA wants to understand the extent to which their remuneration frameworks comply with the requirements of CPS 511.

The checklist is simple:

1. APRA-regulated entities must, each year, review compliance of the remuneration framework against the requirements of CPS 511.
2. Ensure that risk-gateways and clawback provisions are legally binding and objectively enforceable before the conclusion of the 2026-27 reporting period
3. Further, every three years, a comprehensive review of the effectiveness of the remuneration framework must be done by operationally independent, appropriately experienced and competent persons.

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