ASIC expects AFS licensees to demonstrate a defensible framework by evidencing how conflicts are consistently identified, assessed, controlled, and reviewed in practice. A framework is defensible where decisions are documented, repeatable, and would be supported by an independent reviewer as appropriately managing the risk of client detriment.
Expanded Answer
ASIC’s expectations, reflected in RG 181 and general licensee obligations, focus on whether conflicts management systems operate effectively in real scenarios. A defensible framework requires AFS licensees to show a clear process for identifying conflicts, assessing their likelihood and impact on client outcomes, and applying appropriate controls such as avoidance or mitigation. The emphasis is on evidence of decision-making, not the existence of policies.
In practice, this means each conflict should be traceable throughout its lifecycle. The licensee should be able to demonstrate how a specific conflict was identified, how the risk of client detriment was assessed, what control was applied, and how that control was reviewed over time. Documentation should support each step, including the rationale for decisions and any escalation. Consistency is critical—similar conflicts should result in similar treatment across the business.
Regulatory risk increases where decisions are undocumented, inconsistent, or overly reliant on disclosure. ASIC and external reviewers will assess whether the same conclusion would be reached independently based on the available evidence. Frameworks that rely primarily on disclosure, without demonstrating avoidance or effective controls, are unlikely to be considered adequate.
Why it matters
An indefensible framework increases the likelihood of ASIC findings, reportable situations, and client remediation. Where conflicts are not demonstrably managed, issues are often treated as advice failures, amplifying legal and reputational risk for AFS licensees.
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Practical guidance
- Trace individual conflicts end-to-end to confirm that identification, assessment, control, and review are documented
- Test whether similar conflicts are treated consistently across advice files and business units
- Validate decisions through independent review to confirm conclusions are supportable and evidence-based
Further reading