ASIC has announced proposed reforms to its guidance on managing conflicts of interest, marking the most substantial update to Regulatory Guide 181 (RG 181) since 2004. The revised draft guidance, alongside Consultation Paper 385, aims to address emerging misconduct risks and incorporate insights from ASIC’s recent surveillance of private markets.
ASIC Commissioner Kate O’Rourke adds, “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.”
The new draft guidance outlines the regulator’s expectations of FIs in identifying, assessing and managing conflicts across all areas of financial services businesses. It introduces a proportionate legal framework to ensure firms implement arrangements that are robust, effective, and tailored to the specific risks of their firm.
Under section 912A(1)(aa) of the Corporations Act 2001, Australian Financial Services (AFS) licensees are required to maintain “adequate arrangements” to manage conflicts of interest. The draft RG 181 expands on this obligation by providing detailed expectations on how licensees should identify, assess, respond to, and monitor conflicts across their operations.
A Broad Scope with a Four-Step Framework
ASIC has emphasised that the obligation is broad in scope, applying to all actual, perceived, or potential conflicts that arise within, or in connection with, a licensee’s financial services business. The draft guide outlines practical examples across retail and wholesale markets, including proprietary trading risks, fee incentives, third-party relationships, and structural conflicts within firms with complex corporate structures.
To ensure compliance, ASIC proposes a four-step framework for licensees:
- Identify conflict based on “general risk and materiality posed by a conflict or class of conflicts” and the risks posed by a conflict of interest or class of conflicts.
- Assess its risk and materiality, including undertaking a “risk assessment of a conflict of interest or class of conflicts and evaluating what an appropriate response would be”.
- Respond appropriately to effectively manage a conflict of interest, including having “arrangements to evaluate and monitor the effectiveness of your specific response and rectifying or providing remedial action if the response is not effective”.
- Implement, monitor, maintain, and review arrangements to ensure they remain robust and effective, including senior management and (where appropriate) board endorsement, staff and relevant party training, compliance monitoring systems, and accountability and disciplinary measures.
The guide also calls for proportionate, risk-based systems tailored to a licensee’s size, complexity, and potential for consumer, investor, or market harm.
Importantly, the draft guide reinforces that disclosure alone is not enough. ASIC expects licensees to actively consider risk reduction and control measures. The regulator says firms should document all conflicts, decisions, and reviews to demonstrate that compliance programs are “robust and effective.”
The consultation paper also reflects ASIC’s broader strategic priority to enhance market integrity and protect investors and consumers. This emphasis comes in light of the regulator’s February 2025 discussion paper, Australia’s evolving capital markets: A discussion paper on the dynamics between public and private markets, which explored risks in private markets, including related-party transactions, fee arrangements, and valuation practices.
Feedback on CP 385 is open until 5 September 2025. ASIC plans to release the finalised RG 181 in December 2025. See the draft guide and consultation paper from ASIC for more information.
Why Firms Are Turning to MCO’s Conflicts of Interest Risk Reduction Capabilities
Every financial firm, regardless of size or strategy, deserves the tools to confidently operate in a compliant manner and protect itself from financial and reputational harm. Technology plays a vital role in helping firms uphold regulatory expectations and reduce risk from conflicts of interest.
MyComplianceOffice (MCO) exists to help financial institutions:
- Track and manage conflicts of interest.
- Make it easy for employees to declare conflicts and provide attestations.
- Monitor employee close personal relationships to identify potential conflicts of interest.
- Manage ongoing learning and licensing requirements to ensure employees are deemed “fit and proper” for the requirements of their roles.
- Monitor and identify red flags in personal trading activity.
- Proactively flag high-risk electronic communications (eComms).
- Maintain comprehensive archives of eComms data to comply with regulatory and record-keeping requirements.
Most importantly, MCO assists firms in the following ways:
- Identify conflicts by allowing Business Managers to record Conflict Risks for their business, assess its Risk on an ongoing basis, link to associated Controls, through our Know Your Obligations - Compliance Risk Manager
- Assess Conflicts by conducting initial and ongoing risk assessments, including the controls it plans to put in place if it eventuates.
- Respond to conflicts identified by reviewing identified conflict alerts within our Know Your Transactions and Know Your Employee suites, creating once-off, or regular tasks to manage the control, control plans and case management.
- Implement appropriate controls, by documenting internal committee memberships, roles & responsibilities of senior leadership, certifications, records of training, fit & proper assessments within our Roles and Responsibilities module, and regular control test plans of any conflict risks at the Group or Business Unit levels.
MCO’s integrated compliance management suite enables firms to identify conflicts of interest more efficiently across their organisation. MCO provides a consolidated platform for compliance teams to monitor and manage close personal relationships, personal account dealing, MNPI, outside business activities, gifts, entertainment, and hospitality, and more.
