On 16 December 2025, the Australian Securities and Investments Commission (ASIC) released its updated Regulatory Guide 181, AFS Licensing: Managing Conflicts of Interest (RG 181).
For Australian Financial Services Licensees (AFSLs), this update represents a fundamental shift in how their firms should identify, address, and manage employee, director, and agent conflicts of interest.
Understanding Conflicts in Relation to RG 181
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. A key component of RG 181 is the shift towards an objective standard for identifying conflicts of interest.
Regulators, such as ASIC, regard conflicts as:
- Actual when they’ve already occurred.
- Apparent when they appear to exist.
- Potential when they could arise in future.
ASIC states in RG 181 that a conflict of interest can arise “where there are competing financial interests, personal interests, business or related party interests—whether direct or indirect—or competing loyalties and obligations. In some circumstances, a combination of these may give rise to a conflict”.
ASIC’s Four-Step Framework for Managing Conflicts
RG 181 also sets out the “adequate arrangements to manage conflicts” through a four-step framework:
- Identify conflicts 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.
ASIC is sending a clear message that effective management of conflicts of interest risk is not only about picking up on violations after the fact. Firms also need to understand where vulnerabilities exist before they turn into regulatory breaches, properly assess the risk, have response protocols in place, and ensure internal processes drive proactive monitoring, accountability, and disciplinary deterrents.
Broader Obligations, Tighter Expectations
ASIC highlights that firms’ obligations in managing conflicts of interest are broad and “intended to apply widely”. The guidance also applies to conflicts “other than those wholly outside (i.e. completely separate to) the financial services business”.
Firms can no longer regard conflicts as out of scope when they occur in group structures, adjacent business lines, or staff activities where the “relationship, interest or activity may affect (or reasonably appear to affect) how financial services are provided by the business”.
Objective, Common-Sense Testing of Conflicts
The updated guide details a broader sense of how conflicts can appear, through “competing financial interests, personal interests, business or related party interests” and “competing loyalties and obligations”.
The regulator now expects a “common-sense” and objective approach to deciding whether a conflict exists. It also frames the obligation around conflicts that have a “real and sensible possibility of swaying” the judgement or actions of employees, directors, or agents in “an adverse way”.
To meet obligations under RG 181, firms need systems and processes to identify conflicts that matter, explain why they matter, and link each conflict to controls, disclosure, or mitigation.
ASIC Highlights MNPI and Business Structures
ASIC calls out confidential information as a common trigger. It states that receiving confidential information “may give rise to a conflict of interest”, including “material non-public information”. It also makes the expectation plain: staff “should not misuse confidential information” in a way that benefits themselves, another part of the business, another client, or undermines market integrity.
ASIC also highlights “misaligned incentives resulting from business structures”. RG 181 includes multiple structural examples and scenarios, including:
- Vertical Integration and Group Structures: addressing scenarios involving related-party dealings where the interests of a parent entity or a related company may compete with the firms’ responsibilities to clients.
- Private Markets: specific conflicts within private operators and unlisted asset management firms that ASIC has noted during recent surveillance.
- Conflicts of Duty: where a firm has competing responsibilities to different clients or between different arms of the same business, such as in a multi-service firm that acts for the buyer and the seller in a transaction.
Firms should consider testing current arrangements against these expanded scenarios if they are operating in similar structures to ensure they meet ASIC’s expectations.
How Licensees Can Demonstrate Compliance
RG 181 reinforces ASIC’s expectations for firms to document and retain records to demonstrate compliance. These records should include identified conflicts and actions taken, reports to senior management, and records of disclosures (including scripts for verbal disclosures).
However, firms now need to move beyond solely a record-keeping mindset and towards a preventative approach. As the regulator states, “Conflicts management requires a proactive and strategic approach that goes beyond mere disclosure. How you use controls to avoid or mitigate the risk of conflicts, and disclosure to manage conflicts, should be tailored to the specific facts and circumstances. This includes addressing risks associated with a conflict of interest.”
Firms should immediately:
Re-scope your conflicts landscape. Map conflicts across entities, products, distribution, outsourcing, and staff activities that can influence services, including conflicts between inside and outside activities.
Rebuild your register around materiality and risk. Align each entry to the “real and sensible possibility” test and document why the conflict is actual or potential.
Stress-test vertical integration. For firms operating within a broader group, review related-party arrangements and ensure inter-group conflicts are monitored and managed as robustly as external conflicts.
Strengthen controls where disclosure alone is not enough. Where the firm relies on disclosure as the primary control, it should be questioned whether it adequately protects clients. Consider using approval gates, decision restrictions, information barriers, and monitoring in higher-risk areas such as related-party arrangements, valuation, remuneration, and confidential information, including MNPI.
Additionally, consider the role of regulatory technology (RegTech) solutions, which help firms more efficiently and effectively monitor and enforce workflows, capture and log approvals, and maintain robust audit trails.
How RegTech Helps Firms Uphold Compliance Obligations
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 employees’ 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 addressing ASIC’s four-step framework 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. The system brings deep visibility into how employee behaviours align with policies across multiple areas of employee conflicts of interest, including:
- Personal account dealing
- Trade surveillance
- MNPI disclosure
- Close personal relationships
- Attestations, registrations and licences
- Outside business activities
- Gifts, entertainment, and hospitality
Depending on a firm’s business model and other regulatory obligations, these controls can support conflicts governance and robust record-keeping.
Consider your firm’s need for a comprehensive, automated compliance solution with full audit trails to build a more responsive, risk-informed compliance framework across all aspects of employee conduct and conflict-of-interest management.
