Strengthening trust: ASIC proposes changes to conflicts management guidance

The effective management of conflicts of interest is a longstanding and fundamental obligation for Australian financial services (AFS) licensees under the Corporations Act 2001 (Cth). Specifically, section 912A(1)(aa) requires AFS licensees to maintain adequate arrangements for managing conflicts of interest that may arise in the course of providing financial services. This obligation is critical in protecting clients, supporting market integrity, and maintaining public confidence.

To provide clarity on how an AFS licensee may comply with this obligation, ASIC issued Regulatory Guide 181 'Licensing: Managing conflicts of interest' (RG 181) in 2004. In light of development in the regulatory landscape, case law and industry practice, on 30 July 2025, ASIC released proposed updates to its conflicts management guidance for financial services businesses.

ASIC's focus on conflicts of interest

ASIC's move to update RG 181 reflects its aim to ensure the regulatory guide is clear, up-to-date, and fit for purpose to assist AFS licensees in complying with their legal obligations. This update is timely, as the existing RG 181 has not been revised since 2004. In light of recent enforcement actions, as well as substantial changes in the regulatory landscape and industry practices, an update is both timely and essential.

More broadly, conflicts of interest have been on ASIC's radar for some time now. In January 2018, ASIC released Report 562, which examined vertically integrated institutions and conflicts of interest. The issue was also a central theme in the findings of  the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. More recently, ASIC's focus on conflicts of interest has centred around the presence of conflicts in private markets, as noted in ASIC's discussion paper: Australia’s evolving capital markets: A discussion paper on the dynamics between public and private markets. The update to RG 181 represents a significant milestone in ASIC's broader efforts to address these issues, aligning with ASIC's strategic priority to improve transparency and consistency across products and markets.

Of note, uplifting the management of conflicts has also been on the radar of international regulators. The UK's FCA, Singapore's MAS, Hong Kong's SFC and Japan's FSA have each issued recent guidance reinforcing the need for robust governance, independent oversight and clear disclosure of conflicts. These are all trends that the updated RG 181 brings firmly into the Australian context.

What are the proposed updates to RG 181?

ASIC's proposed update to RG 181 incorporates the following key changes:

• clarifying how the conflicts management obligation under s912A(1)(aa) interacts with other legal obligations for AFS licensees, and providing a roadmap of the key legal obligations to consider in complying with the conflicts management obligation;

• including updated guidance on the types of conflicts an AFS licensee should consider, including descriptions of scenarios in which a conflict may arise, supported by illustrative examples;

• providing additional guidance on what may constitute 'adequate arrangements' informed by recent case law and ASIC's review, while also recognising that any approach taken should be proportionate to the particular AFS licensee's obligations, the materiality and risk of identified conflicts and the size and complexity of the business; and

• detailing what effective conflicts management involves, which will include a combination of avoiding, controlling and/or disclosing the relevant conflicts.

What is interesting is that ASIC has used the opportunity to provide more prescriptive guidance, by including specific examples of what ASIC believes constitute a conflict of interest, putting the industry on notice in respect to particular themes and issues.

ASIC's focus on private credit funds

Given ASIC's recent focus on private markets (including private credit funds) and having regard to the conflict-related themes raised in submissions received in response to ASIC's discussion paper in respect to private markets, it is no surprise that ASIC has taken the opportunity to express its views in respect to conflicts in the private market space:

" Conflicts of interest are a key risk in private markets—for example, those arising from related party transactions and fee and distribution arrangements. They are a significant driver of potential misconduct and often have adverse outcomes for market efficiency and investor fairness.

For this reason, our update to RG 181 is a key deliverable of ASIC’s work on public and private markets and aligns with our strategic priority to improve transparency and consistency across products and markets."

In particular, we note that ASIC has set out the following illustrative examples specific to private markets (in particular, private credit funds):

• A fund charging fees to borrowers (such as loan origination or default fees) that are retained by the fund manager, rather than for the benefit of the fund

• A fund charging excessive or unnecessary fees to members, not in their best financial interests

• A fund providing preferential information and treatment to some investors over others

• A fund lending to a related company on better terms than if the fund were lending to an unrelated company or investor in similar circumstances, not in the interests of investors

• A fund relying on a third-party valuation of an unlisted asset, where the third-party valuation is conflicted due to an economic relationship with the issuer of the unlisted asset

Structural conflicts

ASIC has also called out some industry wide conflicts of interest which arise as a result of the structural nature of licensees, including for example:

• A superannuation trustee or responsible entity owning a financial advice business that recommends owners’ products to members

• A financial institution providing a mortgage to a consumer, and encouraging the consumer to get home insurance from a related entity at a premium price that is not in the consumer’s interests

• An adviser encouraging clients to invest in inappropriate financial products from a related entity, then hedging against a client’s interests and directly seeking to generate revenue from expected client losses

• A director’s duties to a financial services business being compromised by and conflicting with the duties they hold as a director of another intra-group company