Continuing its work on capital markets and private credit, the Australian Securities and Investments Commission (ASIC) has released Report 820 Private credit surveillance: retail and wholesale funds.
The report looked outlined the results of surveillance that ASIC conducted on 28 private credit funds between October 2024 to August 2025, spanning listed, unlisted, retail and wholesale funds and looking at fund disclosures, marketing, income transparency, governance and valuation.
It also flagged that ASIC would continue its surveillance of the private credit market in 2026, including looking at the “distribution of private credit funds to retail clients through direct and advised channels”.
“In due course, we will also seek to address areas of identified poorer practices within wholesale private credit funds by updating our regulatory guidance to make it more clearly applicable to wholesale funds,” ASIC said in the report.
“We will also continue using our surveillance work to highlight the need for key legislative reforms for managed investment schemes – to strengthen investor protection, address data gaps, promote transparency and competition in the sector, and better align with international standards.”
While REP 820 was not specifically related to financial advice, it did highlight the key role of advisers in the distribution of retail private credit funds.
Few of these funds required, as part of the distribution conditions in their TMDs, that investors receive financial advice prior to investing, however ASIC found “advisers were a key distribution channel for many retail funds”.
Among the retail private credit funds included in the report, 16 used the advised channel while just three didn’t. Similarly, seven of the wholesale funds utilised advisers in distribution compared with one fund that didn’t.
The regulator also noted among the better practices it observed that some retail funds tailored their distribution conditions to ensure distribution was directed towards the target market.
“As part of the distribution conditions, two retail funds specified that clients should receive personal advice, while seven retail funds required unadvised retail investors to fill out a questionnaire prior to investing,” it said.
Some of what ASIC labelled “poorer practices” included the Inconsistent and unclear reporting and terms, masking portfolio risks and challenging investor decisions; opaque interest margins and fee structures, obscuring the risk and cost to investors; and poor valuation practices, impacting entry and exit prices, performance and fees.
Research houses were also highlighted in the report, noting that their “assessments and the general advice they provide can significantly influence financial advisers, investment platforms and investors, who use their ratings to evaluate the merits of investing in specific funds, including private credit funds”.
“Research houses are expected to undertake rigorous due diligence to substantiate any ratings they issue,” it added.
During a media briefing, ASIC chair Joe Longo said that while financial advisers are not at the centre of this piece of work, “clearly financial advisers have a role to play in connection with some of the other work ASIC is doing around First Guardian and Shield, where they’re part of the ecosystem”.
“Some financial advisers have been advising people into moving their super from an industry or retail fund into a platform investment. But the work we’re doing here does not focus on financial advisers.”
Commissioner Simone Constant added: “We are always conscious of the intersection with the whole system, including advisers and the critical part they play in helping, for example, advise clients into products like this that might be offered on a platform.”
ASIC also released a roadmap for Australia’s capital markets, which aims to “unlock opportunities and tackle emerging risks in Australia’s public and private markets by embracing new capital flows and technologies, keeping pace with evolving investor needs, and making it easier for business and growth capital”.
According to Longo, the roadmap lays out the “choices and future of Australia’s markets”.
“We want our markets – private and public – to grow. That growth means stronger businesses, more jobs and a boost to our economy,” Longo said.
“Strong markets have strong market integrity. We want to lay the foundations for managed investment schemes and private markets to sustainably thrive for the future benefit of business and investors.
“We see enormous opportunity for public and private markets to thrive and grow together especially as they embrace new technology and innovation.
“At the heart of this roadmap is a clear message, that Australia and ASIC want to be backers, not blockers of investment and capital.
“This roadmap is the launchpad for action, not the finish line. Australia should be bold and seize the opportunities ahead, so that our markets remain strong, dynamic and globally competitive.”
So once again lets go after the adviser and leave the funds to do their thing, even though we identified some issues at the fund level.
Advisers who recommend hot new products such as the Shield funds or even private credit can be held at a higher standard than a super fund that approves 100 funds based on other people’s ratings. An adviser should only recommend funds that they know well, better than the average super trustee.
An adviser who accepts inducements to recommend particular investments is putting themselves, the licensee, the wrap account provider and above all their client in peril.
The issue is that advisers are not policing themselves enough and not putting enough pressure on ASIC to investigate the many rogue operators before they cause massive damage. Advisers or at least some advisers usually know who the rogue operators are because of offers they received or clients who came over from rogue advisers.
Until we have a robust pathway that definitely leads to an ASIC investigation when such incidents are reported we will continue as an industry to have to deal with these very large losses. We don’t have to, collectively we know enough.
What would happen if the FAAA keeps a public register of reports of suspected wrongdoing to ASIC, ASIC’s response and what happened to those schemes, funds and advisers who were reported?