Conflicts in focus: ASIC publishes updated regulatory guidance to AFS licensees for managing conflicts of interest (RG 181)

The effective management of conflicts of interest is a fundamental obligation for Australian financial services (AFS) licensees under the Corporations Act 2001 (Cth). Under section 912A(1)(aa), AFS licensees are required to maintain adequate arrangements for managing conflicts which can arise in the course of providing financial services. Compliance with this obligation is essential to protecting clients, safeguarding market integrity, and upholding public confidence.

On 16 December 2025, ASIC released its updated Regulatory Guide 181 "AFS Licensing: Managing Conflicts of Interest" (RG 181), which was last updated in August 2004. This new update reflects significant developments in the financial services landscape and regulatory framework since 2004, and seeks to provide a more detailed, proscriptive, and fit-for-purpose guide to assist AFS licensees in complying with their legal obligations with regard to conflicts management.

ASIC's focus on conflicts in private markets

Broadly, conflicts of interest have been a point of focus for ASIC for some time now, in particular following the 2019 findings of the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry.

As part of ASIC's recent focus in relation to the development of Australia's private capital markets, and in light of recent enforcement actions, ASIC has expressed the need for heightened regulation to address private market risks. In its Discussion Paper "Australia’s evolving capital markets: A discussion paper on the dynamics between public and private markets" published in February 2025, ASIC identified the management of conflicts of interest, such as through misaligned incentives, related-party transactions and treatment of confidential information as a key risk of investments in private capital funds. ASIC noted that while private capital fund operators effectively act on behalf of underlying investors in realising value, the opacity of private markets may give managers significant informational advantages to the potential detriment of investors.

On 30 July 2025, ASIC announced its intention to update its conflicts management guidance under RG 181 for financial services businesses, in light of developments in law and policy and ASIC's private markets surveillance.

In November 2025, ASIC also released its capital markets roadmap (REP 823), and its private credit surveillance report (REP 820), finding in particular that the private credit sector lacks consistent, well-established practices, especially in governance and transparency, fees, treatment of net interest margins, valuation methodologies, and conflicts management, liquidity and credit management. Notably, REP 823 reinforced the importance of sound and effective policies and procedures to address conflicts, and foreshadowed that the updated RG 181 would include examples relevant to conflicts in the private market sector.

Key changes to RG 181

The new update to RG 181 incorporates the following key changes since the 2004 version:

• clarifying the conflicts management obligation:

  • specifically referencing the obligations is intended to ensure that financial markets and services are efficient, honest and fair, a targeted reference to one of the core obligations of the financial services licencing regime, section 912A(1)(a), and a key enforcement mechanism for ASIC.

  • clarifying that the obligation is broad and intended to apply to all conflicts of interest beyond the financial service business of a licensee and its representatives, including third-party relationships, remuneration, and confidential information;

  • specifying the application to directors, market participants, responsible entities, other AFS licensees, representatives and employees. A clear signal that ASIC will be seeking compliance from a broad range of financial services participants.

  • clarifying how the conflicts management obligation interacts with other legal obligations for AFS licensees, and providing a non-exhaustive list of legal obligations and information to consider in complying with the conflicts management obligation; and

  • clearly referencing compliance with financial services law and the need of market participants to establish and maintain adequate risk management systems.

• identifying the types of conflicts AFS licensees should identify and manage: ASIC has identified types of conflicts which may arise, supported by various illustrative examples, including that a private credit fund operator may face conflicts with clients of members, "motivated by its financial interest in retaining fees and interest margins on loans under management – prioritising its own revenue over the interests of fund members, even though the fund members provide the capital and carry the credit risk.";

• providing guidance on the need for robust, tailored arrangements to manage conflicts: ASIC has included guidance on what "adequate arrangements" involve to ensure they are robust and effective, emphasising a "proportionate and risk-based approach". This means controls must be tailored to the materiality, seriousness, and likelihood of conflicts, as well as the size, complexity, and risk profile of the business and its specific activities. Arrangements must also be responsive to changes over time, requiring periodic reassessment in response to business growth, new products, or regulatory changes.

• including practical steps for effective conflict management: ASIC has updated the guidance to provide a more holistic and nuanced approach to effectively managing conflicts, to support a proactive and strategic approach to conflicts identification and management, and providing more illustrative examples of mechanism to control conflicts; and

• Including a non-exhaustive catalogue of related legal obligations and information: ASIC has included a detailed catalogue in the appendix of the new RG 181 signposting key obligations for conflicts management for AFS licensees across different financial services and other activities, the sources of those obligations, and relevant guidance and further information relevant to those financial services.
  
  This catalogue covers not only the conflicts obligation under section 912A(1)(aa), and under the Corporations Act, but also broadly including under statute, ASIC Regulatory Guidance, APRA Prudential Standards, and case law more broadly, offering a more holistic source of information.

Thanks to Brynna Hundy for her help in writing this article.