As we have now said goodbye to FY25, we look back on some of the more significant regulatory developments that fund managers can't afford to ignore.
Private Markets Scrutiny
Fund managers have been put on notice by ASIC throughout this year with several releases discussing the future of private markets in Australia. ASIC has conveyed a clear intention to increase regulatory surveillance of private markets including in particular private credit and has not ruled out future regulatory reform. Fund managers with private market products should ensure that ASIC's focus areas such as fee disclosure, valuation transparency and conflicts of interest meet regulatory requirements and best practices.
Sustainability Reporting
Described as a 'once in a generation change', Australia's sustainability reporting regime has commenced. Larger fund managers meeting certain size thresholds are now required to disclose their climate-related risks and opportunities together with Scope 1, 2 (and in another 12 months Scope 3) emissions in their annual sustainability reports, with reporting obligations for smaller fund managers and responsible entities commencing in the next two years. Fund managers should familiarise themselves with the sustainability reporting regime and determine the applicable reporting commencement date.
AI Governance
ASIC has highlighted the prevalence of AI use by licensees including fund managers and expressed concern about lagging governance policies. Inadequate AI governance can contravene general conduct obligations, consumer law provisions and directors' duties. Fund managers implementing AI systems and processes must ensure that they have adequate policies governing the use of AI to avoid catching ASIC's regulatory attention.
Crypto as an Asset Class
Digital assets are an asset class of increasing attractiveness to investors yet the regulation of digital assets in Australia continues to be unsettled. ASIC has released proposed updates to its digital asset guidance which if adopted could lead to many digital assets and businesses needing to obtain Australian Financial Services Licences (AFSL) and/or Australian Markets Licences. Fund managers should ensure they are appropriately authorised before deploying capital towards digital assets.
Foreign Financial Service Providers (FFSPs) Licensing
FFSPs who operate under the current licensing regime or those looking to enter the Australian market continue to be faced with an uncertain regulatory future. There has been no indication from Government whether the current licensing regime will be extended beyond its March 2026 sunset date, and the proposed amendments to the current licensing regime continues to sit in legislative purgatory after the Federal election earlier this year. Offshore fund managers who provide services to wholesale investors will need to monitor any future announcements from Government and if necessary consider pathways to obtaining an AFSL or another licensing exemption.
These are just some of the topics that will be discussed at the K&L Gates Funds Management Conference in Sydney on Tuesday 29 July 2025 and in Melbourne on Thursday 31 July 2025. If you are interested in joining us at this in person event, please register here.
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