ASIC has released proposed updates to its conflicts management guidance for financial services businesses. Media Release 25-150MR
Regulatory Guide 181 Licensing: Managing conflicts of interest (RG 181) was last updated in August 2004. The proposed changes will align the guidance with developments in law and policy and have been informed by ASIC’s private markets surveillance work.
ASIC Commissioner Kate O’Rourke said: ‘Conflicts management is a core obligation for financial services businesses and helps promote consumer protection and market credibility.
‘Conflicts of interest are more than mere moral dilemmas. They can undermine trust, integrity and performance, causing serious harm to consumers, investors and overall market confidence.’
The updated guidance sets out how Australian financial services (AFS) licensees should comply with their conflicts management obligation and explains:
- how the law applies, including its scope and interaction with other related obligations
- the types of conflicts AFS licensees need to identify and manage to meet their obligation
- the need to have robust and tailored arrangements that are adequate to manage conflicts, and
- how licensees can effectively manage conflicts.
Consultation CP 385 was released 30 July 2025. Comments close 5 September 2025.
Draft Regulatory Guide 181 July 2025 – AFS Licensing: Managing conflicts of interest
Your obligation
If you are an AFS licensee, or an AFS licence applicant, you must comply with your general licensing obligations under s912A of the Corporations Act 2001 (Corporations Act).
This includes your obligation to have in place adequate arrangements for managing conflicts of interest that may arise wholly, or partially, in relation to activities undertaken by you or your representative in the provision of financial services as part of your financial services business (‘the conflicts management obligation’): see s912A(1)(aa).
Scope of the obligation
The conflicts management obligation is broad and is intended to apply widely—it is not limited in its application. It applies to all conflicts of interest other than those wholly outside the financial services business of you or your representative.
It applies to conflicts of interest that arise within the financial services business. It also applies to conflicts that arise between something within thefinancial services business and something outside it. For example:
(a) a conflict between the financial services business and corporate lending business within a conglomerate firm; or
(b) a conflict between the financial services business and an employee’s personal or financial interest outside it.
Complying with your obligation
If ASIC have reason to believe you are not complying with your conflicts management obligation, ASIC may take administrative action. This could include suspending or cancelling your AFS licence or imposing additional licence conditions: see ss915C(1) and 914A(1).
Depending on the severity, a breach of your conflicts management obligation may result in civil penalties for individuals or for corporations.
What is a conflict 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.
You should take a ‘common-sense’ approach to determining if there is a conflict of interest. Whether there is a conflict of interest will ultimately turn on the facts and circumstances of a situation.
A conflict of interest can include:
(a) conflicts of, or within, the financial services business (including conflicts arising from its corporate structure and relationships);
(b) the conflicts of any individual—for example, clients (retail or wholesale), members, shareholders, employees, directors, thirdparties—that arise in relation to the financial services business; and
(c) the conflicts of any entity—for example, wholesale clients, counterparties, related entities in intra-group structures, commercial third parties—that arise in relation to the financial services business.
Types of conflicts
(I have extracted the examples that relate to general insurance)
Conflicts with clients
- An insurance broker who receives commissions from product issuers recommending products with higher commissions to a client, resulting in the client receiving similar cover but at a higher price
Conflicts between clients
- A conglomerate firm using information obtained from one client to benefit another client
Structural conflicts
- A financial institution providing a mortgage to a consumer, and encouraging the consumer to get home insurance from a related entity at a premium price that is not in the consumer’s interests
Proprietary conflicts
- A financial institution having a conflict between its proprietary interests and the interests of its clients and counterparties in a market transaction
Conflicts relating to duties
- A director’s affiliations with an outside organisation influencing decisions that the director makes about the financial services business, to the detriment of clients
- An auditor’s long association with a financial services business client impairing the auditor’s objectivity and independence, leading to a conflict of interest
- A director’s duties to a financial services business being compromised by and conflicting with the duties they hold as a director of another intra-group company
Third-party conflicts
- A third party used to outsource aspects of the financial services business (e.g. its responsible manager or compliance functions) having an economic relationship with another financial services business, interfering with a third party’s ability to perform its outsourced role
- An expert’s independence being compromised by material financial interests when providing an expert report on [the cause of a claim. Note: I have included this as an example, it is not in the Draft RG 181].
- A comparison website having commercial relationships with product issuers, resulting in the website prioritising and recommending products to consumers from issuers that provide it with the most commissions, benefits, or advertising revenue, rather than products in the consumers’ interests
Individual conflicts
[Note: I have included this example, it is not in the Draft RG 181].
- An underwriter or claims officer managing a request for cover or the claim of a family member or someone that they have a personal relationship with.
- A broker dealing with an insurer or underwriting agency or TPA and a family member works at that firm.
Remuneration
Remuneration practices, including non-monetary benefits, may cause misaligned incentives and result in a conflict of interest. This includes commissions, volume-based remuneration, staff rewards and bonuses, or expenses. Harms to consumers that may result include:
(a) being sold financial products or services that are not in their interests due to the commissions or financial benefits you can earn; or
(b) being charged unnecessary fees or excessive expenses.
Note: this is the rational that supports Informed consents for insurance commissionsobligation.
Having adequate arrangements
You must have adequate arrangements to manage conflicts of interest. Your arrangements should be robust and effective.
Your arrangements may include:
- policies, processes and procedures;
- people and resources;
- systems and controls over the business and staff; and
- governance and supervisory arrangements.
Your arrangements should be tailored with your own circumstances in mind and designed to meet your obligations.
Adequate arrangements to manage conflicts
Your arrangements should generally include, but are not limited to, the following steps:
- Identify
- Assess
- Respond
- Implement
Effective conflicts management
Effective conflicts management will generally involve a combination of avoiding, controlling, and disclosing conflicts of interest. This informs the adequacy of your arrangements. Note: See ASIC v Avestra.
A failure to effectively manage a conflict may result in a breach of your conflicts management obligation. Note: For example, see Australian Securities and Investments Commission v Westpac Banking Corporation (Penalty Hearing) [2024] FCA 52.
Examples of conflict control mechanism
- information barriers
- functional seperation
- communivation policies
- approval requirements
- rotation of staff
- arm’s length engagement
- decision-making restrictions
- complinace monitoring
- governance and transparency
- discplinary measures
Disclosing conflicts of interest
Principles
- disclosure should be timely, prominent, specific and meaningful
- content – nature, likelihood of occurring, potential consequences & steps taken to mitigate
- method of disclosure
- inappropriate disclosure – commercially sesnsitive or protected by confidentiality agreement or NDA, breach or privacy obligations or inside information
- disclosure for financial product advice
- disclosure for retail and wholesale clients
Roadmap – key legal obligations and information to relevant conflicts management
ASIC includes a roadmap (Appendix) that is intended to signpost key obligations and information to assist AFS licensees to comply with the conflicts management obligation under the Corporations Act. It emphasises that conflicts can arise across a wide range of activities. This roadmap does not introduce new obligations or guidance.
If you would like assistance to review your insurance, broking, underwriting or claims business for conflicts of interest against the ASIC roadmap, contact me, Paul Muir.
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