In February this year, ASIC released a discussion paper seeking industry engagement on actionable ideas to enhance the operation of both public and private markets.
On 22 September 2025, ASIC released Report 814 which, among other things, identified better and poorer practices and areas for industry and regulator attention. The report highlighted four key areas of concern, being: 1) conflicts of interest, 2) fees and remuneration, 3) portfolio transparency and valuations, and 4) terminology. To address these areas of concern, the report identified a number of best practices:
- Fees – full disclosure of all fees and remuneration
received by the manager in connection with the fund including
quantification of amounts (e.g. percentage commission of the assets
invested and bonus);
- Valuations – conducting valuations of assets at least
quarterly by an independent third party;
- Portfolio Disclosure – detailed disclosure of loan and
portfolio information on a quarterly basis;
- Liquidity – fulsome disclosure of the prospect of
liquidity and the mechanisms of redemption including timing, exit
pricing and valuations;
- Related Party Transactions – no related party
transactions or, where they occur, review and sign-off of price and
terms by an independent third party;
- Leverage – the use of leverage is adequately disclosed to
investors along with the fund's relevant policies and
guidelines;
- Governance – having an independent trustee of the fund
manager or independent directors on the board of the responsible
entity;
- Investor Treatment – same fees as well as terms and
conditions offered to investors in the same fund;
- Distributions – the nature of distribution payments
should be clearly set out in regular investor reports; and
- Definitions – clear, concise, and consistent use of terms such as 'investment grade,' 'security,' 'loan to value ratio' and 'senior debt.'
ASIC Enforcement
This report comes at the same time as ASIC has issued several interim stop orders against private credit funds for failures to adequately define the target market in the Target Market Determination (TMD). These enforcement actions provide insights into ASIC's regulatory focus for private credit TMDs. In addition to these areas of concern identified above, ASIC seems to be focused on:
- Clear and accurate definition of risk levels for the
fund;
- Appropriate portfolio allocation given the risks of the fund,
including with regard to the preservation of capital;
- Adequate specification of investment timeframes for retail
clients; and
- Suitable arrangements to prevent investors from holding a greater allocation than what is appropriate.
Next Steps
ASIC has committed to release in November this year a series of guidance material, including ASIC's response to the earlier discussion paper, results from private credit surveillance and expert reports on the industry. Following that, ASIC has indicated that it will release a regulatory guidance catalogue to assist the funds management sector to more easily identify and comply with existing regulatory obligations.
We are following the developments in the private credit sector closely and will continue to update you on any developments.
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.
