There have been a lot of changes in the financial services sector over the last two decades, yet the Australian Securities and Investments Commission’s (ASIC) Regulatory Guide 181 Licensing: Managing conflicts of interest has managed to remain untouched.
Chief among the regulatory developments for financial advisers is the introduction of the best interests duty and prohibitions on conflicted remuneration.
Beyond the financial advice space, RG 181 also predates market integrity rules for securities and future market participants, as well as prudential requirements.
“Our approach in draft RG 181 reframes our guidance to align it with parliamentary intent and the operation of the law – that the conflicts management obligation applies to all conflicts of interest, except those that occur entirely outside of a financial services business,” ASIC’s consultation paper on the draft said, adding that it is “not an expansion of the obligation”.
“We also clarify its relevance to, and benefits for, both consumer protection and market integrity. This is not a focus of the current guidance in RG 181.”
In line with this, the regulator noted that conflicts of interest were raised as an area requiring further clarification in a number of submissions to its February discussion paper on the evolving dynamics between public and private markets.
“Conflicts management is a core obligation for financial services businesses and helps promote consumer protection and market credibility,” ASIC commissioner Kate O’Rourke said.
“Conflicts of interest are more than mere moral dilemmas. They can undermine trust, integrity and performance, causing serious harm to consumers, investors and overall market confidence.”
Broadly, the aim of the updated guidance is to set out how Australian Financial Services (AFS) licensees should comply with their conflicts management obligation.
This includes how the law applies, including its scope and interaction with other related obligations, the types of conflicts AFS licensees need to identify and manage to meet their obligation, the need to have robust and tailored arrangements that are adequate to manage conflicts, and how licensees can effectively manage conflicts.
According to the consultation paper, the “revised approach” sets out general descriptions of situations where a conflict may arise and provides practical examples, aiming to help licensees identify and address different types of conflicts.
“In addition, our revised approach acknowledges the scalability of conflicts, which can range from minor ethical breaches to serious misconduct or corruption. It carries over the existing guidance that conflicts of interest can be actual (real), perceived (apparent), or potential, and highlights the importance of assessing their materiality,” it said.
“By focusing on the scope of conflicts, our revised approach demonstrates the need for AFS licensees to adopt appropriate risk management strategies, based on the potential impact of the conflict on consumer, investor, and economic harm, as well as market integrity.”
According to O’Rourke: “These updates support ASIC’s strategic priority to improve transparency and consistency across products and markets and aim to ensure financial markets operate efficiently and fairly.”
ASIC added that the consultation is part of its broader regulatory maintenance work and aligns with its “simplification agenda”.
The consultation is open until 5pm AEST, 5 September 2025.
Whilst the requirements under RG105 remain appallingly low to remain, or become, the Responsible Manager of an AFSL, tinkering with RG181 is unlikely to add any value.
I just can’t help but think they might come after risk commissions again.
Be interested to know how they perceive a superfund with its own inhouse investment teams, that also uses its own advisers to retain FUM.
“Be interested to know how they perceive a superfund with its own inhouse investment teams, that also uses its own advisers to retain FUM.”
Very good point and I wonder as well, over the years I come to assume that they simply believe the “Compare the pair” ads on TV and ask no questions of how the best returns and lowest fees have no steak knives?
Another big change in the last 20 years has been the rise of SMAs as a conflicted inhouse product widely used by larger licensees and equity partners. This needs far more regulatory scrutiny.
FINALLY, the Regulators are addressing what is at the core of the AFSLs scandals conflicts of interests!!! I cannot believe this day has arrived!
What about the core of MIS scandals too ?
Given ASIC’s useless record, I have zero faith they will do anything to address this properly.