The Australian Securities and Investments Commission (ASIC) has updated its guidance on how Australian financial services (AFS) licensees, including insurers and intermediaries, are expected to manage conflicts of interest. The revised Regulatory Guide 181 AFS licensing: Managing conflicts of interest (RG 181) replaces guidance first issued in 2004. The new version is intended to reflect current law, policy settings, and ASIC’s supervisory experience, including work in private markets and more complex group structures.
ASIC commissioner Kate O’Rourke said conflicts of interest remain a material concern for the financial system. “Conflicts of interest aren’t just ethical dilemmas. They pose real threats that erode trust, tarnish reputations, and cause lasting harm to consumers, investors, and the entire financial ecosystem. Effective conflict management is more than a regulatory checkbox – it’s the cornerstone of trust in financial services,” O’Rourke said. The guide applies across all AFS licensees, including insurers, underwriting agencies, managing general agents (MGAs), brokers, and advice businesses.
Under section 912A(1)(aa) of the Corporations Act 2001, AFS licensees must have adequate arrangements in place to manage conflicts of interest, other than those that arise wholly outside their financial services business. The revised RG 181 states that the obligation does not require all conflicts to be eliminated. Instead, licensees must “adequately and effectively” manage conflicts within the scope of their financial services activities. ASIC has also updated its description of the purpose of the obligation so that it more closely aligns with the Explanatory Memorandum to the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Bill 2003 and the objectives of the licensing regime.
The guidance further outlines how the conflicts management obligation operates alongside fiduciary duties. ASIC notes that where a licensee or representative is in a fiduciary position, this will influence what constitutes adequate conflict management. The guide also acknowledges that the terms governing a fiduciary relationship, such as a trust deed, may authorise certain conduct that would otherwise give rise to a conflict.
ASIC has changed its approach to describing types of conflicts. References to “perceived” or “apparent” conflicts as a separate category have been removed. RG 181 instead directs licensees to apply an objective, fact-based test to determine whether an actual or potential conflict of interest exists, including whether a reasonable person might conclude that such a conflict is present. The regulator has set out further guidance on the meaning of actual and potential conflicts and has expanded its discussion of materiality and seriousness. Relevant factors include the possible impact on customers and the effect of other duties, obligations, and prohibitions that apply in the circumstances. Illustrative examples in Table 1 of the guide have been revised to draw a clearer distinction between the interests and relationships that give rise to a conflict and any resulting misconduct or harm. ASIC has also added examples that cover insurance businesses, vertically integrated groups, and other models where multiple roles, products, or revenue streams may lead to conflicting incentives.
The updated RG 181 states that conflict management arrangements should be proportionate and risk-based, rather than uniform across businesses. ASIC expects licensees to tailor their frameworks to the nature, scale, and complexity of their operations, including their group structure and the financial services they provide. For insurance businesses, this may involve examining where conflicts arise in product design, distribution agreements, delegated authority arrangements, claims handling, reinsurance, and the remuneration of intermediaries and authorised representatives.
ASIC states that maintaining policies and registers on paper alone does not satisfy the obligation. Licensees should be able to demonstrate that conflicts management is embedded in business processes, governance structures, training, monitoring, and escalation. The regulator has not prescribed standard templates or benchmarks, noting that what is adequate will depend on each licensee’s circumstances. The guide also notes that the sophistication of clients, including whether they are wholesale or retail, may influence how conflicts are managed. However, it does not create distinct standards for each client type; the statutory obligation applies across both segments.
RG 181 distinguishes between different methods of addressing conflicts. Avoiding a conflict involves identifying conflicts or classes of conflict and putting measures in place to prevent them from arising. Controlling a conflict involves mechanisms aimed at reducing the risk that an existing or identified conflict will influence decisions or outcomes inappropriately. Information barriers are identified as one tool that can be used either to avoid or to control conflicts, depending on how they are structured and applied. ASIC has revised its examples of control mechanisms in Table 3 to cover communication controls, removal of staff from particular matters where conflicts are identified, and the role of compliance monitoring and committees.
On disclosure, ASIC now states that in many cases disclosure alone may be insufficient to manage conflicts. The regulator notes that the effectiveness of disclosure will depend on the nature and materiality of the conflict. The guide indicates that disclosures should generally be proportionate, risk-based, and tailored, and that conflicts may need to be disclosed to customers and prospective customers, as well as internally to relevant governance, risk, or compliance functions. RG 181 also comments on commission-based remuneration. ASIC states that commission structures should be avoided where advisers only earn commission, but the guidance does not prohibit commission models more broadly. The guide also notes that in some services, such as market making, a licensee may profit at the expense of a client without that fact in itself establishing a conflict.
The final version of RG 181 follows a consultation process conducted between July 30 and Sept. 5, during which ASIC received 26 submissions from industry participants, industry associations, and other stakeholders. Respondents generally supported changes to the clarity and structure of the guidance but raised a range of technical points, including around examples, materiality, disclosure, and the interaction with other obligations.
In the final guide, ASIC has revised its examples, expanded guidance on materiality and the scope of the obligation, and retained an appendix catalogue of related legal obligations as part of RG 181 rather than issuing it separately. The catalogue outlines key related obligations but is not exhaustive and is not intended to operate as a checklist. ASIC has not provided a formal transition period. The regulator has indicated that the updated guide reflects the current legal framework and that AFS licensees remain responsible for ensuring compliance with their obligations.
For insurers, underwriting agencies, and brokers, the updated RG 181 may lead to a review of conflict management frameworks, including conflicts linked to distribution models, advice and sales incentives, claims-related decision-making, reinsurance, and intra-group arrangements, and how these are recorded and overseen at board and senior management level.
