ASIC expects AFS licensees to demonstrate “adequate arrangements” for conflicts management through operating compliance systems, including a current conflicts register, documented decision-making, governance oversight, monitoring of advice outcomes, and staff training. These arrangements must be evidenced in practice and applied consistently, not limited to a written policy.
Expanded Answer
Under the Corporations Act and ASIC’s guidance in RG 181, “adequate arrangements” means AFS licensees must have systems that effectively identify, assess, and manage conflicts of interest in a way that reduces client detriment. ASIC assesses adequacy based on whether the framework operates in practice, not whether a policy exists. This includes having clear processes, defined responsibilities, and documented decisions that demonstrate how conflicts are treated.
In practice, ASIC expects to see a maintained and actively used conflicts register that records identified conflicts, risk assessments, and applied controls. Decision-making should be documented, including why a conflict was avoided, controlled, or disclosed. Governance oversight is critical, with compliance or risk committees reviewing conflicts and challenging decisions where required. Monitoring activities, such as file reviews, should test whether advice aligns with stated controls and whether conflicts are influencing outcomes.
Regulatory risk increases where arrangements are static, poorly evidenced, or disconnected from actual advice practices. ASIC expects training records showing that advisers and staff understand their obligations and can apply the framework in real scenarios. The absence of operational evidence is a common failure point in AFSL applications and surveillance.
Why it matters
If “adequate arrangements” cannot be demonstrated, AFS licensees risk breaching general obligations, particularly the duty to act efficiently, honestly and fairly. ASIC enforcement commonly targets gaps between policy and practice, increasing exposure to reportable situations and remediation.
Unsure how this applies to you?
Get a clear answer in a 15-minute call with a compliance specialist. Book your call
Practical guidance
- Maintain a current conflicts register that records conflicts, risk ratings, and control decisions
- Document conflict treatment decisions with clear rationale and escalation where required
- Conduct regular file reviews and governance oversight to test that controls operate in practice
Further reading