Private capital — from roadmap to enforcement

ASIC's laser-like focus on private capital will continue 9 min read

Since releasing its private markets roadmap and surveillance findings in November 2025, the Australian Securities and Investments Commission (ASIC) has moved at pace, from research and surveillance to investigation and enforcement.

In less than six months, it has:

• issued multiple design and distribution obligations (DDO) stop orders against well-known private credit funds;
• commenced or expanded civil penalty proceedings against nearly two dozen defendants in connection with the Shield and First Guardian collapses;
• published a regulatory catalogue setting out the key primary legal obligations for private credit fund operators;
• rewritten its conflicts management guide; and
• continued with its surveillance at major wholesale and retail managers, moving from document and information requests to on-site surveillance.

Consistent with what has been said in our previous Insights,¹ ASIC is now actively pursuing the private capital sector using the range of enforcement tools it has in its arsenal. Too, the Federal Government's 2026–27 budget provides for an additional $16.5 million in its funding over the next four years to enhance supervision of the managed investment scheme sector.

Those with exposure to the sector should expect this focus to continue through 2026 and beyond. We explain what you can expect and what you need to be doing now.

Key takeaways

We recommend the following:

1. Treat Report 820 Private Credit Surveillance (REP 820) and Report 814 Private Credit in Australia (REP 814) as a litigation roadmap, not a compliance checklist. ASIC has published the precise conduct it considers non-compliant and the legal provisions it will rely upon—operators should conduct a documented gap analysis and remediation plan now, before enforcement overtakes them.
2. Restructure fee and margin arrangements before ASIC does it for you. Map every revenue stream (including those of related entities), assess whether disclosure accurately reflects total remuneration, and address fee opacity—particularly net interest margin, origination fees and default interest captured through special purpose vehicle (SPV) or related-party structures.
3. Reframe distribution relationships as legal exposure, not just a commercial pipeline. The Shield and First Guardian proceedings show ASIC is pursuing the full distribution chain—target market determinations (TMDs) and product disclosure statements (PDSs) should be treated as the contractual and legal foundation for every distribution arrangement, and reviewed against the September and November 2025 stop orders.
4. Treat valuation governance as a litigation risk, not an accounting exercise. The standard is not whether a valuation policy existed—it is whether it would have caught the issue, and whether it was applied correctly.
5. Audit your conflicts framework against what ASIC will actually examine. The central question is not whether a conflicts policy is compliant on its face, but whether the documentary record—investment committee and investor advisory committee minutes, allocation records, related-party registers—demonstrates it was applied.
6. Build enforcement readiness into your operating model. ASIC's expectations largely apply regardless of whether a fund is retail or wholesale—operators should assess now how they would respond to a compulsory information request or unannounced on-site attendance, including questions of privilege and document production at short notice.

From roadmap to warning

ASIC's private markets surveillance crystallised into regulatory action on the four themes the market expected: disclosure of risk, fees, valuations and conflicts of interest.

On 5 November 2025, ASIC released Report 823 Advancing Australia's Evolving Capital Markets (REP 823);² REP 814;³ and the findings of its thematic surveillance of 28 retail and wholesale private credit funds in REP 820.⁴ In December, it published a Private Credit Fund Catalogue,⁵ setting out the core legal and regulatory obligations applicable to retail and wholesale funds. ASIC has also updated its conflicts of interest guidance,⁶ and signalled a further refresh of core funds management guidance (including RG 45 for mortgage schemes and the wholesale guidance in INFO 251) during 2026–27.

Together, these documents set out the regulator's views on the sector. ASIC's reports have indicated that the Australian private credit market (which it estimates at around $200 billion), roughly half of which is real estate focused, was found to exhibit:

• inconsistent and unclear reporting, and terms that mask portfolio risks;
• opaque interest margins and fee structures, with some managers retaining 50–100% of borrower-paid fees, and using SPVs to capture net interest margin without passing the true economic return through to investors;
• weak governance and poorly managed conflicts of interest, particularly in related-party lending, transfers between affiliated funds, and holdings across senior debt, mezzanine debt and equity in the same borrower;
• poor valuation practices, including inconsistent frequency, limited independence, and loan-to-value ratios quoted on completion values rather than cost; and
• inadequate practices in key risk areas, indicating poor preparedness for stress scenarios.

At the launch press conference, ASIC Chair Joe Longo warned that 'significant players' in private credit should 'frankly, assume [ASIC] will be taking more targeted enforcement action' if they did not address the issues raised during surveillance. Commissioner Simone Constant foreshadowed that the next surveillance wave would extend to real estate lending structures and continuation funds.

Enforcement and surveillance

On-site surveillance and information gathering

ASIC has recently begun further surveillance of a number of private credit managers, noting it is increasing supervision and surveillance of private markets, and enforcing compliance with financial services laws, to support confident and informed participation, investor protection and market integrity.⁷ Public reporting on the surveillance says that ASIC has been reviewing documents and issuing detailed information demands covering investor identities, wholesale or family office status, concentration levels, side arrangements, conflict-of-interest and fee disclosures, treatment of default interest, valuation methodology, arrears management and risk-taking.⁸

The composition of the managers engaged during the November 2025 surveillance round is instructive: it included some of the largest international and domestic names in the market, reflecting ASIC's stated view that market influence carries commensurate responsibility for upholding market integrity (REP 823). Scale does not insulate a manager from scrutiny.

DDO stop orders

ASIC's surveillance has already produced interim DDO stop orders against four private credit products, following its retail private credit surveillance:

• La Trobe Australian Credit Fund and US Private Credit Fund⁹ (12 Month Term Account and 2 Year Account)—interim stop orders on 18 September 2025, over concerns as to the TMD for certain products. ASIC revoked the interim stop orders after La Trobe took steps to address its concerns.
• RELI Capital Mortgage Fund¹⁰—stop order on 19 September 2025, with ASIC's concerns including a TMD that contemplated investors holding the fund as a 'core component' (25–75%) of their portfolio, an incomplete risk-level disclosure, and a claim of suitability for capital preservation that did not match the fund's risk profile.
• TruePillars Investment Trust¹¹—stop orders on 5 November 2025, on the PDSs for two unit classes, on the basis they may have been defective in disclosing investments, conflicts of interest, fees, and risks relating to liquidity, withdrawals and valuation—and contained potentially misleading statements about distributions, loss reserves and withdrawals.

There are three points that can be taken from looking at these orders collectively:

• ASIC acted within weeks of publishing REP 820.
• The stop orders span varied product types: retail mortgage funds, private credit funds, investment trusts and related-party origination structures.
• The targets range from large market participants managing upwards of $20 billion to much smaller players with net assets of under $15 million, confirming that ASIC is enforcing across the size spectrum.

Court action—the Shield and First Guardian litigation

Running parallel to the DDO stop orders, ASIC's civil penalty litigation arising out of the Shield Master Fund and First Guardian Master Fund collapses now involves proceedings against 19-plus defendants across 10-plus Federal Court proceedings, with more than 11,800 affected investors. In a Parliamentary Joint Committee in September 2025, ASIC Deputy Commissioner Sarah Court noted that it was reviewing the conduct of a further 140 licensed financial advisers and entities. Of those, 20 individuals have already faced court action, 50 are involved in current investigations, and there are 70 other individuals and entities on the 'list'.¹²

These proceedings indicate that ASIC is pursuing a spectrum of enforcement across a number of parallel tracks:

• the 'primary conduct' track—targeting the core operators and promoters whose misconduct allegedly caused the losses. A number of this group are the subject of ongoing criminal investigations, including for significant money-laundering offences;
• the 'advisers' track—targeting providers of allegedly conflicted personal financial advice, seeking banning orders and injunctions from providing financial services; and
• the 'gatekeeper' track—targeting various superannuation platform operators and research houses that ASIC alleges ought have done more to identify and prevent misconduct by the primary wrongdoers.

While the primary conduct in connection with Shield and First Guardian failures appears to involve a level of dishonesty that we would hope is not widespread, it serves as a case study for how ASIC might seek to pursue enforcement action in the future in the private capital space, including against a range of upstream entities far removed from the primary conduct.

Those roles exist across the sector and, accordingly, there is a wide variety of market participants who are exposed to potential liability where failures occur.

ASIC's dual enforcement approach: retail and wholesale

• Retail-facing funds and 'gatekeeper' entities that provide access to those funds remain the most directly exposed.
  Responsible entities owe the statutory duties in Chapter 5C of the Corporations Act 2001 (Cth).
  • Australian financial services (AFS) licensees owe the section 912A obligations (efficiency, honesty and fairness; conflicts; risk management; competence).
  • Superannuation trustees additionally owe the covenants in ss 52 and 54B of the Superannuation Industry (Supervision) Act 1993 (Cth)—various of these obligations form the basis of ASIC's claims against EQT, Diversa and (on admission) MIML and Netwealth.
  • DDO applies at the retail boundary, and provides a forum for ASIC to take action quickly.
• Wholesale fund managers are, however, no longer operating out of view. The on-site surveillance described above has been directed largely at wholesale managers, and ASIC has expressly called out in its Private Credit Fund Catalogue the various obligations that attach to wholesale fund managers, including AFSL obligations to avoid misleading, deceptive or unconscionable conduct (which apply regardless of wholesale status). It has also repeatedly called for reform of the wholesale client test.

What to expect—and what approach to take—in 2026

Based on ASIC's public roadmap and its 2026 enforcement priorities, which now expressly include 'poor private credit practices', we expect the following:

• DDO stop orders ASIC will continue issuing interim stop orders within weeks of identifying TMD or PDS deficiencies, and publicising them, as a way to put the market on notice of its concerns.
• New civil penalty proceedings against gatekeepers These will potentially extend beyond the Shield and First Guardian investigations, to trustees, research houses and advice licensees whose conduct in relation to any other private credit funds is of concern.
• Deeper wholesale surveillance This will have a particular focus on real estate lending structures, continuation funds, fee and margin structures, and conflicts of interest management, as Commissioner Constant has flagged.
• Data gathering ASIC has said it will conduct a data-gathering pilot in 2026–27.
• Engagement with industry and government on possible reform of the wholesale client test
• Further regulatory guidance refreshes These will include RG 45 for mortgage schemes, INFO 251, and the s912A-related guides.

In less than a year, private credit and private capital has moved from a regulatory 'watch this space' topic to a key ASIC enforcement priority. The tools it is deploying (stop orders, civil penalty proceedings and surveillance backed by compulsory powers) are the same ones it has used for years in listed markets. ASIC is now treating private credit and private capital as a key priority, and participants are well advised to engage with that reality now rather than await further regulatory intervention.