On 16 December 2025, the Australian Securities and Investments Commission (ASIC) released its long-awaited update to Regulatory Guide 181 (RG 181) – AFS Licensing: Managing Conflicts of Interest. This marks the first comprehensive revision of the guide in over two decades, signalling a significant shift in the regulator’s expectations.
For Australian Financial Services Licensees (AFSLs), this is not merely a cosmetic update or a simplification exercise. It represents a fundamental recalibration of how conflicts of interest should be identified, assessed, and managed in today’s financial landscape. The changes draw heavily on ASIC’s recent surveillance into private markets and the evolving complexity of vertically integrated business models.
At MIntegrity, we have analysed the updated guidance to determine the practical implications for licence holders. The message from the regulator is clear: reliance on disclosure is no longer a “get out of jail free” card, and theoretical compliance is insufficient. Firms must now demonstrate effective, objective, and risk-based management of conflicts.
Moving to an Objective Standard
One of the most critical shifts in the updated RG 181 is the move towards an objective standard for identifying conflicts of interest. 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.
The updated guidance steers licensees away from a subjective approach. Instead, firms are now expected to identify conflicts based on objective facts and the practical consequences of their business arrangements. The focus is on whether a conflict actually exists in a material sense, or potentially may give rise to an actual conflict and whether it carries a risk of consumer harm, rather than its theoretical existence or optical impact.
This change requires AFSL holders to revisit their conflict registers and identification frameworks. It is no longer enough to list every conceivable theoretical conflict. The conflicts management obligation is generally concerned with conflicts that have a real and sensible possibility of swaying judgement or actions—or those of any representatives (including employees, directors or agents)—in an adverse way. The assessment must be grounded in the reality of the firm’s structure, duties, and client outcomes.
The Decline of Disclosure as a Primary Tool
For years, a common industry practice has been to “disclose and proceed.” Firms would identify a conflict, add a paragraph to a Financial Services Guide (FSG) or Product Disclosure Statement (PDS), and consider the obligation met.
The 2025 update to RG 181 challenges this reliance on disclosure. ASIC has clarified that while disclosure remains a tool, it is often insufficient on its own to manage a conflict adequately—especially where the risk of consumer harm is significant.
Licensees must now demonstrate that they have adequate arrangements to control or avoid the conflict. If a conflict is inherent in a business model—such as in vertically integrated structures or related-party transactions—firms must show that their controls effectively mitigate the risk of detriment to the client. If a conflict cannot be managed without a risk of material harm, the guidance suggests it must be avoided.
Clarifying Scope: “Wholly Outside” the Business
A persistent area of confusion for many licensees has been the boundary of the conflicts management obligation. The updated RG 181 provides welcome clarity on when a conflict is considered to be “wholly outside” the financial services business.
ASIC has refined the guidance to help firms distinguish between personal interests or external activities that have no bearing on their licensed services, and those that do. However, this comes with a warning: the definition of “inside” the business is likely broader than some firms anticipate. Conflicts arising from group structures, parent companies, or even unrelated business activities that impact the financial services provided are squarely within scope.
Modernised Examples for a Complex Market
The financial services landscape has changed dramatically over the years. To reflect this, ASIC has introduced a suite of updated examples in RG 181. These examples address current complexities such as:
- Vertical Integration and Group Structures: Detailed scenarios involving related-party dealings, where the interests of a parent entity or a related company may compete with the duties owed to clients.
- Private Markets: Drawing on recent surveillance, the guide addresses specific conflicts inherent in private equity and unlisted asset management.
- Conflicts of Duty: Situations where a firm owes competing duties to different clients or between different arms of the same business (e.g., a multi-service firm acting for both the buyer and seller in a transaction).
These examples are not just illustrations; they serve as a benchmark. Firms operating with similar structures should test their current arrangements against these new scenarios to ensure they align with ASIC’s expectations.
What AFSL Holders Need to Do
The release of the updated RG 181 triggers an immediate need for action. Compliance committees and risk managers should not wait for the next annual review to update their frameworks. MIntegrity recommends the following steps for all licensees:
- Review Conflict Registers and Policies: Assess whether current identification processes meet the objective standards. Ensure that the register reflects actual and potential material conflicts.
- Re-evaluate Disclosure Practices: Scrutinise reliance on disclosure. Where disclosure is the primary control, ask: Does this actually protect the client? If the answer is ambiguous, stronger controls—or avoidance—may be required.
- Stress-Test Vertical Integration: For firms part of a broader group, review all related-party arrangements. Ensure that inter-group conflicts are managed with the same rigour as external ones, focusing on the potential for consumer harm.
- Training and Culture: Update training modules to reflect the “objective standard” and the diminished role of disclosure. Staff must understand that managing conflicts is about client outcomes, not just ticking a compliance box.
In conclusion
The renewed RG 181 is a call to the financial services sector to lift their game. It moves the industry away from a tick-box compliance exercise and towards a substantive, risk-based approach to integrity. Firms that embrace this shift will not only satisfy the regulator but also build stronger, more resilient relationships with their clients.
For those navigating these changes, MIntegrity’s regulatory risk experts are available to assist in reviewing conflicts management frameworks and ensuring alignment with the new 2025 standards.
Take Your Next Step
To learn more about how RG 181 impacts your business and what your next steps should be, contact MIntegrity today.
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Disclaimer: This article provides general information only and does not constitute legal or compliance advice. Firms should seek independent advice tailored to their specific circumstances.
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