In its latest update on Australia's public and private markets, ASIC has called on industry bodies to lift their standards across Australia's private credit sector following expert observations on better and poorer practices (REP 814).
The update follows ASIC's discussion paper on evolving capital markets (25-021MR) that highlighted the growing availability of private capital had met demand from investors and borrowers.
In response to the rapid growth of private credit, ASIC commissioned a review of Australia's private credit funds sector by infrastructure investment executive Richard Timbs and former banker and chief risk officer Nigel Williams. REP 814 provides foundational insights on the size and nature of the sector in Australia right now and includes examples of better and poorer practices and areas for industry and regulator attention.
REP 814 and industry feedback has also underscored that if 'done well', private credit complements the banking system and provides further opportunities for innovation, employment and growth.
REP 814 has identified positive private credit practices and called out concerning ones that require address. These issues include opaque remuneration and fee structures, related party transactions and governance arrangements, valuation practices and inconsistent use of terms for effective disclosure.
The insights align to early findings from ASIC's retail and wholesale surveillance work, which recently led to design and distribution stop orders against RELI Capital Mortgage Fund (25-208MR) and La Trobe's US Private Credit Fund (25-205MR) and Australian Credit Fund (25-206MR).
ASIC Chair Joe Longo said the report showed the importance of adhering to existing regulation and highly regarded global standards to ensure confidence in Australia's rapidly expanding $200 billion private credit sector.
'Private credit is playing an important role in our capital markets and Australia should implement industry standards that align with international best practice.
'Enhanced standards are needed to lift practices across the sector. They will help promote confidence, improve market integrity and empower investors to make informed decisions.
'When an industry agrees on clear standards, it shows a strong commitment to doing things right and we welcome the industry's commitment to leading this work. They need to act decisively.
'While the report highlights some encouraging practices, it also reveals concerning behaviours that fall short of market expectations and more importantly that are inconsistent with existing financial services law. With the pace of growth in size and reach of the domestic sector, this becomes all the more important.
'Promoting confident and informed market participation is a shared responsibility, including those already demonstrating and upholding high standards.
'ASIC expects meaningful action in response to these findings and will not hesitate to intervene where progress falls short.'
In November, ASIC will release its response to the discussion paper on Australia's evolving capital markets, alongside its retail and wholesale surveillance findings. The response will include clear guidance on key principles, along with additional research and expert insights to guide our future priorities, work program and regulatory roadmap.
Background
ASIC's discussion paper on the evolving dynamics between public and private markets explored the shifting dynamics between public and private markets, and the feedback was clear: both markets are essential to a strong, efficient, and globally competitive economy.
In response, ASIC received over 90 submissions from a cross-section of stakeholders, and published industry feedback (25-094MR) distilled the feedback into themes.
To support healthy and attractive public markets, the agency announced changes to the IPO process (25-096MR) in June, and recently made a number of moves to foster competition and create more opportunities for companies and investors (25-154MR), and to attract more foreign capital to Australia.
