ASIC issues DDO stop orders re credit and mortgage funds
On 18 September 2025 ASIC issued interim stop orders in relation to three credit fund products and on 19 September 2025, ASIC issued another interim stop order in relation to a mortgage fund. ASIC has now issued 95 interim stop orders and one final stop order under the design and distribution obligations (DDO).
The stop orders were issued in relation to the three credit fund products because ASIC considered that:
- the target market determinations (TMDs) suggested an inappropriate level of portfolio allocation for the target market given the risks of the products; and
- the TMDs did not include appropriate distribution conditions.
On 24 September 2025, ASIC revoked the stop orders in relation to two of the credit products after their TMDs were amended to:
- reduce the percentage of investors' investable assets considered to be appropriate for investment in the products (from 50% to 25%); and
- introduce distribution conditions, including a questionnaire used by the responsible entity to identify whether applicants are in the revised target markets.
The interim stop order was issued in relation to the mortgage fund due to concerns in relation to:
- the portfolio allocation in the TMD (25% - 75% of investors' investable assets);
- the absence of distribution conditions in the TMD; and
- the fund's use of an incomplete measure of risk.
We previously reported on DDO stop orders issued by ASIC in our Funds Updates of 31 May 2024, 16 February 2024 and 14 June 2024.
ASIC releases paper on Australia's private credit funds sector
On 22 September 2025, ASIC announced the release of a paper it had commissioned on Australia's rapidly growing private credit funds sector, 'Private credit in Australia' (Report 814) which provides foundational insights on the size and nature of the sector in Australia and includes examples of better and poorer practices and areas for industry and regulator attention. ASIC considers that Report 814 has identified the following areas as requiring regulatory focus:
- remuneration and fees: the potential for misalignment between managers and investors as well as poor disclosure of the true cost of managing the fund
- related-party transactions and governance arrangements: including fund managers lending to related parties, holding debt and equity in the same entity via the fund, and transferring investments between funds managed by the same manager
- valuation: frequency, methodology, beneficiary and independence of valuation, and recognition of impairments
- liquidity: inadequate disclosure about opportunity and process based on the type of fund (closed-end or open-end) and risk of liquidity mismatch
- investment reporting: mixed investment reporting across the market, leading to lack of visibility and investment exposure
- definitions and key terms: the need for clear, concise and consistent use of terms such as 'investment grade', 'security', 'loan to value ratio' and 'senior debt', and
- concentration; the risk of an unknown amount of debt or level of credit risk – particularly in real estate – as well as exposure of retail investment to the private credit market.
ASIC has announced that it will release its response to its earlier discussion paper on Australia's evolving capital markets in November. We reported on ASIC's earlier discussion paper in February 2025.
Superannuation platform operator enters into enforceable undertaking
On 25 September 2025, ASIC announced that it is no longer seeking the imposition of a civil penalty from a superannuation platform operator (Platform Operator) and has obtained an admission from the Platform Operator that it did not act efficiently, honestly and fairly when it failed to place a fund on a watch list for heightened monitoring.
The Platform Operator has, under a court enforceable undertaking, agreed to pay 100% of the amounts invested in that fund through the platform (approx. $321million) to the investors, to return them to the position they were in before that investment.
ASIC has reiterated that superannuation platform operators are gatekeepers and that it expects them to take active steps to monitor the funds they make available through their platforms.
ASIC issues new legislative instrument to facilitate digital disclosures
ASIC has made a new legislative instrument to continue relief provided for digital disclosures following industry consultation.
The instrument consolidates the relief previously provided in ASIC Corporations (Facilitating Electronic Delivery of Financial Services Disclosure) Instrument 2015/647 and ASIC Corporations (Removing Barriers to Electronic Disclosure) Instrument 2015/649 which will sunset on 1 October 2025.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
