Australia’s private credit sector: ASIC's REP 814 signals the need for higher standards

ASIC’s newly published report on the private credit sector (REP 814, September 2025) marks a turning point for fund managers, boards, and investors. The regulator’s comprehensive review, supported by recent media releases and industry coverage, highlights that private credit done well is good for the Australian economy but standards need to improve. The Australian Financial Review and other outlets have described the report as “damning,” noting that ASIC’s findings are likely to trigger a wave of regulatory tightening and increased scrutiny.

The message from ASIC is clear – private credit can complement the banking system and provide further opportunities for growth, but the industry needs to lift standards and demonstrate consistency to avoid enforcement.

Key findings from ASIC’s Final Report

• Widespread deficiencies: ASIC identified “questionable” practices across the private credit sector, including poor disclosure of fees, inconsistent portfolio reporting, weak valuation processes, and inadequate management of related-party transactions.

• Transparency and disclosure: Many funds failed to provide investors with clear, comprehensive information about fees, portfolio composition, loan performance, and risk. ASIC calls for standardised, loan-level reporting and full fee transparency.

• Valuation practices: The report found that valuations were often infrequent, internally managed, or lacked independent oversight – raising concerns about objectivity and potential conflicts of interest.

• Related-party transactions: ASIC observed insufficient independent review and disclosure of related-party dealings, with some transactions occurring at non-arm’s length terms.

• Governance shortcomings: A lack of independent board representation and robust governance frameworks was common, undermining accountability and investor confidence.

• Unequal investor treatment: Differential fees, preferential liquidity, and selective disclosure were identified, with ASIC warning that all investors must be treated equitably.

ASIC’s regulatory expectations and next steps

ASIC’s media releases reinforce the message: the industry must “lift its game” or face tougher regulation. ASIC note its "early findings from ASIC’s retail and wholesale surveillance work, which recently led to design and distribution stop orders". The regulator is urging the industry to:

• Conduct reviews against better practice: review and understand the range of practices, and understand where the fund may be falling short.

• Strengthen governance and oversight: ensuring suitable qualified, independent directors, appropriate valuation and audit committees, and robust oversight of conflicts and investor treatment.

• Align to better industry practices: for areas including fee disclosures, portfolio disclosures, valuation, related party transactions, governance and investor treatment (see below).

What boards and managers should do now

ASIC has been direct in its release, noting it "expects meaningful action in response to these findings and will not hesitate to intervene where progress falls short".

Boards and Management should begin to undertake a review of the report's findings, against their own internal practices:

• Ask the hard questions: what are our current practices in each of ASIC’s focus areas? Where and how do we fall short of these expectations?

• Prioritise transparency: identify potential disclosure gaps and mobilise for a disclosure documents update, including readying appropriate committees for TMD and PDS updates.

• Review governance structures: ensure the board has sufficient independence and expertise to oversee private credit activities.

• Prepare for regulatory change: anticipate further ASIC action and be proactive in adopting best practices ahead of formal rule changes.

Initial efforts should be centred around the report's observations of the range of market practices, with the intent to align to good practice.

Translating regulatory intent into action

Fees

Good practice: Full disclosure of all fees and remuneration received by the manager in connection with the fund, including quantification of amounts.    

Weaker practice:  Non-management fees either not disclosed adequately or otherwise not quantified to show amount relative to fund size.  

Key initial questions for boards/managers: 

What fees and streams of remuneration are currently being charged or received? 

Can we map and quantify all fee categories over the past year?
What additional disclosures should we be making? 

Portfolio disclosure

Good practice: Detailed disclosure of loans and portfolio information on a quarterly basis.

Weaker practice: Aggregated reporting with limited or no reporting on portfolio composition, loan impairment, PIK loan exposure or distribution.

Key initial questions for boards/managers:

What information is currently provided to investors about the portfolio?

Are there gaps in detail, frequency, or transparency that need to be addressed?

Valuations

Good practice: Quarterly independent valuations, or at least reviewed by an independent third party quarterly. Valuations for benefit of lender of security holder

Weaker practice: Valuations six-monthly or less frequent. Valuations performed internally by staff involved in assessing the initial loan,

Key initial questions for boards/managers:

How are valuations currently performed and reviewed?

Are independent third parties involved, and is there any potential conflict of interest?

Related party transactions

Good practice: No related party transactions, or where they occur, review and sign-off price and terms by an independent third party.

Weaker practice: Transfers between related funds at differing valuations or with no independent review or oversight.

Key initial questions for boards/managers:

Have any related-party transactions occurred?

What processes are in place to review, approve, and disclose these transactions?

Governance

Good practice: Independent trustee or sufficient independent members on Responsible Entity board.

Weaker practice: No interdependence achieved through Responsible Entity Board membership or independent trustee.

Key initial questions for boards/managers:

How independent is the current board or trustee structure?

Are there sufficient checks and balances, and when was the last governance review conducted?

Do we have the requisite skills in place?

Investor treatment

Good practice: Same fees and well as terms and conditions offered to investors in the same fund.

Weaker practice: Differential fees, differential access to loans, preferential liquidity requirements. Limited or select disclosure to investors of differential treatment.

Key initial questions for boards/managers: Are all investors receiving the same terms and disclosures? Are there any side letters or preferential arrangements that have not been fully catalogued or disclosed?