ASIC updates conflicts of interest guidance for AFSLs

What you need to know

• ASIC has updated its Regulatory Guide 181: AFS licensing: Managing conflicts of interest.
• The updated regulatory guide is designed to better assist holders of Australian financial services licences (Licensees) in meeting their obligation to have adequate arrangements in place to effectively manage all conflicts of interest, except those that occur wholly outside a financial services business, under s912A(1)(aa) of the Corporations Act.
• The update makes a number of key changes to ASIC’s previous guidance, including:
  • clarifying what is considered a conflict of interest;
  • emphasising the application of the objective test for analysing conflicts of interest;
  • clarifying the scope of conflicts obligations for Licensees;
  • providing practical steps for effective conflict management; and
  • updating expectations regarding remuneration practices.
• Licensees will need to review their current processes and frameworks to ensure they comply with ASIC’s updated expectations for managing conflicts of interest.

Background

On 16 December 2025, ASIC updated Regulatory Guide 181: AFS licensing: Managing conflicts of interest (RG 181).[1] The update aims to “help licensees fulfil their licensing obligation to have robust arrangements and tailored conflict management strategies in place”.[2]

Having in place adequate arrangements for managing conflicts of interest that may arise wholly, or partially, in relation to activities undertaken by a Licensee or its representatives in the provision of financial services as part of their financial services business or the financial services business of their representatives, is required under section 912A(1)(aa) of the Corporations Act 2001 (Cth).

The issue of the updated RG 181 follows ASIC’s public consultation period, which ended in September 2025. During the consultation, industry members, groups and interested parties submitted 26 responses. Following the end of the period, ASIC published a summary of feedback (ASIC Feedback) received on the preceding Consultation Paper 385: Proposed update to RG 181 Licensing: Managing conflicts of interest (CP 385).[3]

The updated RG 181 supersedes the previous version, issued over 20 years ago in August 2004.

We have summarised below several of the key changes made by the updates to RG 181.

Actual or potential conflicts

Perhaps one of the most fundamental changes arising from the revision of RG181 is the removal of previous references to ‘apparent’ conflicts from the definition of conflicts of interest. This change follows submissions from industry members that the inclusion of ‘apparent’ or ‘perceived’ conflicts was “not supported by the terms of s912A(1)(aa), the explanatory material and the general law”.[4]

Therefore, the updated RG 181 deals only with ‘actual’ and ‘potential’ conflicts.[5]

The change aligns RG 181 with an objective standard for identifying conflicts of interest and simplifies how Licensees can assess whether something constitutes a conflict of interest.

Objective standard

RG 181 emphasises that Licensees must use a “common-sense, objective and fact-based approach”[6] to determining whether a reasonable person might consider an actual or potential conflict to exist. Licensees must comply with this objective test, rather than relying on subjective perceptions that a conflict may exist.

The existence of a conflict of interest depends on the facts and circumstances of a particular situation. Licensees must consider the nature, scale and complexity of their businesses (and the complexity of their customers) when assessing whether their arrangements are adequate for managing conflicts of interest.

ASIC expects Licensees to take a “proportionate and risk-based approach”[7] to compliance with conflicts management obligations.

Scope of obligations

The updated RG 181 clarifies the scope of the conflict management obligation for Licensees. RG 181 unambiguously states that the scope of the conflicts management obligation “applies to all conflicts of interest other than those wholly outside (i.e. completely separate to) the financial services business”[8] of a Licensee and its representatives.

Licensees must recognise that if a conflict arises between their financial services business and something outside it, they will need to consider and manage it appropriately. ASIC provides non-exhaustive examples of what this could look like in practice, including that a “competing personal or financial interest outside the business may affect how [a Licensee or its representatives] provide financial services within the business, as well as the quality of the services they provide”.[9]

For Licensees, obligations cease to apply only when conflicts are outside of, and unrelated to, their financial services business.

Disclosure insufficient

ASIC’s update clarifies the role of disclosure in managing conflicts of interest. RG 181 states that in many cases, “disclosure alone may be insufficient to effectively manage conflicts”.[10] By including such a limitation, the regulator is clearly signalling that its expectations of industry are lifting, with a greater emphasis on controlling or avoiding conflicts where possible.

Although disclosure of material conflicts to customers remains an important mechanism for managing conflicts, Licensees cannot rely on disclosure as their only management tool.

Review of arrangements

Prior to the release of the updated RG 181, ASIC signposted an intention to require Licensees to “regularly” review conflicts arrangements to ensure their adequacy.[11] However, ASIC ultimately removed the “regular” element from this obligation in the final version of their guidance following feedback from industry that an arrangement may still be adequate without being regularly reviewed.[12]

ASIC still expects Licensees to review the adequacy of their arrangements; however, the timing for those reviews are to be determined by the facts and circumstances of each Licensee. ASIC noted that “changes to business operations, market conditions and regulatory obligations”[13] are all markers that could warrant a review of a Licensee’s conflicts management framework.

Fees

ASIC has removed the statement from its 2004 guidance that Licensees should “avoid remuneration practices that are purely intended to maximise fees or returns at the expense of clients or members”.[14] The regulator explained that it removed the statement on the basis that such practices do not inherently create a conflict of interest.[15] ASIC acknowledged that certain financial services may result in profit for the Licensee, at the customer’s expense.[16]

While on its face this may appear to be a ‘loosening of the reins’ by ASIC, the underlying objective standard of conflicts management remains: Licensees must continue to manage any fee or remuneration practices that create actual or potential conflicts of interest.

Direct conflicts between clients

RG 181 shifts focus from avoiding situations where some clients are “favoured” over others to avoiding situations where “the interests of one client are in direct conflict with the interests of another”.[17] ASIC makes its position clear: direct conflicts of interest between clients should be avoided where possible.

This amendment to the 2004 guidance removes a source of ambiguity, as determining whether a customer has been “favoured” over another creates the potential for inconsistent interpretation and application as between Licensees.

Licensees now have a clearer picture of what ASIC expects of them regarding the competing interests of customers.

Further information

For more information, or to discuss any questions or issues in relation to AFSL conflicts or other regulatory obligations, please reach out to a member of KHQ’s Superannuation & Financial Services or Corporate & Commercial teams on +61 (0)3 9663 9877, or email the team at contact@khq.com.au.

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[1] https://www.asic.gov.au/regulatory-resources/find-a-document/regulatory-guides/rg-181-afs-licensing-managing-conflicts-of-interest/

[2] Media release: ASIC renews guidance on managing conflicts of interest in financial services.

[3] https://www.asic.gov.au/regulatory-resources/find-a-document/consultations/cp-385-proposed-update-to-rg-181-licensing-managing-conflicts-of-interest/

[4] ASIC Feedback, page 3.

[5] Defined in RG 181.32.

[6] ASIC Feedback, page 3.

[7] RG 181.52.

[8] RG 181.11.

[9] RG 181.12.

[10] RG 181.78.

[11] ASIC Feedback, page 6.

[12] ASIC Feedback, page 6.

[13] ASIC Feedback, page 6.

[14] ASIC Feedback, page 9.

[15] ASIC Feedback, page 9.

[16] ASIC Feedback, page 9.

[17] ASIC Feedback, page 7.