ASIC renews guidance on managing conflicts of interest: What financial services leaders need to know

Managing conflicts of interest isn’t new for financial services organisations, but the latest update from ASIC to Regulatory Guide 181 AFS Licensing: Managing Conflicts of Interest (RG 181) shows that the regulator is turning up the heat on governance and compliance. 

The refreshed guidance, released in December 2025, reflects evolving market practices and ASIC’s focus on embedding conflict management into governance and day-to-day operations. For Australian Financial Services (AFS) license holders, advisers and boards, this new guidance puts even more focus on protecting clients, strengthening trust and reducing regulatory risk. 

In this article, we unpack the key changes from previous guidance, explore sector-specific implications, and outline practical steps for financial services leaders to embed best practice approaches across their organisations. 

Why has ASIC updated RG 181? 

The updates to RG 181 replace guidance issued by ASIC in 2004 and have been aligned with developments in law and policy, as well as ASIC’s experience and insights from recent surveillance into private markets. Industry feedback was also one of the drivers of change - during a public consultation period on ASIC’s discussion paper on the evolving dynamics in public and private markets in 2025, ASIC received 26 submissions from industry groups and other interested parties, with broad support for simplifying and clarifying guidance around conflicts of interest. 

What has changed? 

ASIC has made it clear that managing conflicts effectively is integral to protecting both consumers and investors. The guidance covers: 

• A clearer scope of the law, including how the law applies to conflicts of interest, and how it links to related obligations 
• Clearer guidance of the types of conflicts AFS license holders should identify and manage 
• Stronger expectations around the need for ‘adequate arrangements’ to manage conflicts 
• Updated sector-relevant examples 
• Practical steps for effective conflict management 
• A non-exhaustive catalogue of related legal obligations and information, explaining how conflict management intersects with other obligations and how this may influence what constitutes ‘adequate control’. 

Conflicts of interest 

ASIC’s updated guidance in RG 181 defines a conflict of interest as any situation where competing financial, personal, business, or related-party interests (direct or indirect) could influence judgment or actions. Conflicts can also arise where an organisation or its representatives owe competing duties to different clients, members, or counterparties, even where no direct financial interest is involved. Conflicts may be defined as ‘actual’, where they currently exist, or ‘potential’, where circumstances could reasonably lead to a conflict in the future.

The test to determine a conflict of interest is a practical one: would a reasonable person consider that these interests create a real and sensible possibility of swaying decisions in an adverse way? The seriousness of a conflict depends on factors such as scale, impact, and any intersection with other legal obligations, so the process of identifying and managing a conflict must be nuanced for each unique situation. 

In practice, conflicts are rarely clearcut. Determining whether a matter represents an actual, potential or perceived conflict often requires professional judgement, particularly where interests intersect or evolve over time. Leading practice in these situations is to record matters in a conflicts register, even where no conflict is ultimately assessed to exist, to support transparent consideration, consistent assessment and appropriate escalation where required. 

Ensuring an organisation has adequate arrangements 

AFS license holders are obligated to have adequate arrangements for managing actual or potential conflicts of interest that may arise (either wholly or partially), in relation to activities undertaken by themselves or by their representatives, which could include employees, directors or agents.

ASIC has been clear in the guidance that these conflicts don’t necessarily need to be eliminated, but they do need to be managed carefully with adequate controls and disclosures, and the conflict should be avoided if this isn’t possible. ASIC has stated that disclosure alone will not always be sufficient - conflicts should be avoided where possible, controlled where avoidance is not practical, and only disclosed where those measures cannot adequately protect affected parties. 

Arrangements may encompass a range of factors including an organisation’s policies, processes and procedures, people and resources, systems and controls over staff and the business, and governance and supervisory arrangements. 

ASIC confirmed that organisations should have arrangements in place to identify and assess conflicts, as well as address or respond to them, to ensure they can be accurately managed. Arrangements must also be continuously implemented, monitored, maintained and reviewed to be ‘adequate’, and they must be documented and recorded to demonstrate compliance. Documenting how judgement has been exercised in assessing and managing conflicts is increasingly important in demonstrating that arrangements are operating effectively in practice. 

Dealing with conflicts 

Once identified, conflicts must be either disclosed, controlled, or avoided to be adequately managed under the guidance, and failure to manage in one of these ways will result in a breach of obligations: 

• Avoiding conflicts - The most effective way to manage conflicts is to prevent them from arising or eliminate them entirely. An example of when this would be appropriate might be declining to act for two clients with directly opposing interests in a takeover, prohibiting volume-based or commission structures that misalign incentives, or refusing to enter a transaction that creates a direct conflict 

• Controlling conflicts - When it isn’t practical to avoid a conflict, organisations should implement robust controls to mitigate risk and protect judgement and objectivity. An example may be establishing information barriers and functional separation between business units, applying trading restrictions or additional approvals for related-party transactions, and removing conflicted staff from decision-making. ASIC has also highlighted that competing confidentiality obligations and information asymmetries can themselves create or exacerbate conflicts, meaning that disclosure may not be appropriate where it would compromise confidential information 

• Disclosing conflicts - Clear, timely, and specific disclosure enables affected parties to assess the impact of a conflict before making an informed decision. An example of this could be informing a client that the firm will receive a commission from a product issuer, outlining the nature, likelihood, and potential consequences of the conflict, and providing practical steps the client can take. 

Strong governance and oversight are critical to ensuring these measures are applied consistently and effectively, and organisations must ensure they have a structure that supports effective management of conflict, as well as documented policies, compliance monitoring, and board-level accountability. 

Sector-specific conflict examples 

Conflicts of interest can manifest differently across financial services sectors, and ASIC’s guidance highlights the importance of identifying these sector-specific risks so that they can be adequately managed by leaders. ASIC has placed increased emphasis on ‘structural conflicts’, which are conflicts arising from business models, group structures, and related-party arrangements, rather than solely from individual behaviour. These risks can be more difficult to mitigate and require strong governance, independent oversight, and clear accountability. Here are some common examples:

Banking

Conflicts in banking and lending often arise from structural roles and incentives. For example, a bank acting as both lender and underwriter for a corporate client may prioritise loan repayment over impartial advice. Another common risk is proprietary trading desks using confidential client order information to benefit their own positions. These conflicts apply across retail and wholesale banking, particularly where remuneration structures misalign staff behaviour with client outcomes.

In institutional banking environments, conflict identification and management is often more mature, reflecting the need to balance competing client, counterparty, and market interests on a daily basis. In these settings, conflicts frameworks are typically embedded into frontline decision making and governance processes, rather than being treated as purely compliance driven. This level of maturity is not always mirrored across the broader financial services sector, highlighting an opportunity for organisations to uplift practices by embedding conflicts management more deeply into business operations.

Fintech 

Fintechs may face conflicts linked to technology-driven models. Examples include a fintech recommending their own higher-fee payment or lending platform over better alternatives, or monetising customer data by promoting third-party services without clear consent. Poor governance, including inadequate disclosures, can exacerbate these risks. 

Wealth and asset management

Conflicts in wealth and asset management may stem from remuneration structures, research independence, and control over valuations. Analysts with personal holdings may produce biased research, while managers responsible for both managing and valuing assets might inflate valuations to increase performance fees. ASIC has identified these risks as particularly acute in private markets, where opacity, discretion over valuations and allocations, and related-party arrangements can materially increase the risk of investor harm if conflicts are not managed effectively.

Superannuation funds face heightened obligations to act in members’ best financial interests. Risks may include trustees favouring related-party products, intra-group service arrangements without arm’s-length terms, and staff using price-sensitive portfolio information for personal gain. In the superannuation environment, conflicts can also arise between the interests of members and those of the trustee’s corporate entity or other service providers within the group. Explicitly recognising these potential tensions reinforces the importance of strong governance, clear accountability, and transparent decision making to ensure member outcomes remain paramount. 

Insurance 

In insurance, conflicts frequently arise from commission-based remuneration. Brokers incentivised by volume-based commissions may recommend higher-cost policies that are not in the client’s best interest. White-label product distribution can also obscure third-party relationships, making impartiality harder to assess. 

Whichever sector or sectors that they operate in, organisations need to take a proportionate, risk-based approach to identify conflicts early and address them by avoiding, controlling, or disclosing them. They must ensure their arrangements are supported by documented policies, independent oversight, and ongoing compliance monitoring to protect clients, members, and market integrity.

Practical steps for conflict management 

With ASIC’s latest update on managing conflicts of interest, now is the ideal time for financial services leaders to review and strengthen their processes and systems to align with the regulator’s expectations for adequate arrangements. ASIC has positioned the updated RG 181 as a supervisory and enforcement benchmark, not just high-level guidance, making it critical for organisations to demonstrate (not merely document) how conflicts are identified, assessed, and managed in practice.level guidance, making it critical for organisations to demonstrate 

Practical steps include: 

• Running a gap assessment against RG 181 to confirm alignment with the updated guidance 
• Reviewing and updating conflict management frameworks, ensuring policies reflect the principles of avoiding, controlling, and disclosing conflicts 
• Considering sector or organisation-specific risks and ensure these are addressed in your arrangements 
• Mapping actual and potential conflicts across products, services, remuneration structures, and related-party arrangements, and reviewing remuneration and incentive structures to eliminate arrangements that misalign staff behaviour with client or member interests 
• Strengthening governance and oversight by establishing or updating conflict registers, escalation channels, and board-level reporting, and assign clear accountability for monitoring and remediation 
• Implementing robust controls such as information barriers, functional separation, independent approvals, and trading restrictions where avoidance isn’t practical, and testing these controls regularly 
• Enhancing disclosure practices to ensure disclosures are timely, specific, and meaningful so they can be managed effectively 
• Providing staff with targeted training on RG 181 obligations to help embed a culture of transparency and accountability across the organisation 
• Preparing board level reporting, metrics, and attestations to demonstrate that conflicts are actively identified, escalated, and managed, and that arrangements remain effective over time.

By embedding proportionate, risk-based arrangements, tightening governance, and demonstrating clear accountability, financial services leaders will help their organisations meet ASIC’s expectations under RG 181. By taking practical steps to manage conflicts of interest, organisations can strengthen trust, improve outcomes for clients and members, protect brand reputation, and create a competitive advantage. 

How BDO can help 

Navigating ASIC’s updated RG 181 requirements can be complex, particularly when tailoring conflict management frameworks to your sector and business model. We can assist by conducting independent review of conflicts policies, processes, registers and potential or actual breaches, including related investigations and remediation. Independent oversight in this context can play a critical role in strengthening defensibility under regulatory scrutiny. 

For support, contact BDO's financial services team for expert advice.