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TheRegulationofPrivateMarketsWheretoNextf

The Regulation of Private Markets in Australia—Where to Next?

In Short 

The Situation: The Australian Securities & Investments Commission ("ASIC") is increasing its focus on private markets, adopting a similar approach to other international regulators. Following on from its introduction of a dedicated private markets unit last year, on 26 February 2025, ASIC released a Discussion Paper on Australia's evolving capital markets.  

The Result: The ASIC Discussion Paper does not propose any specific regulatory reforms at this stage but outlines ASIC's key priorities, such as the protection of retail investors who are increasingly exposed to private markets through direct investments in private capital funds and also as members of superannuation funds. ASIC seeks to consult with the industry with a view to assessing whether regulatory settings should be re-examined.  

Looking Ahead: The Discussion Paper indicates that ASIC is already focusing on compliance with existing financial services laws and will be increasing surveillance of private capital funds. Having regard to foreign precedents set by peer regulators such as the U.S. Securities and Exchange Commission ("SEC"), we expect that additional regulation of private markets is a likely eventual outcome.

Background: Growth of Private Capital in Australia 

The private markets sector is growing at a rapid pace. ASIC reports that Australian private capital funds' assets under management have almost tripled in the last 10 years—and are approximately $148.6 billion. While this remains a relatively small piece of the global US$14.6 trillion industry and remains small compared to market capitalisation of Australia's public markets, ASIC's analysis of superannuation data indicates that retail investors' exposure to global private market assets is significant due to the allocation of superannuation investments to private assets.  

ASIC's Key Focus Areas  

The Discussion Paper identifies the following areas, which ASIC regards as key risks of investments in private capital markets for it to focus on: 

  • Opacity: Private markets do not have the disclosure obligations of public markets, and there is a lack of transparency around key information such as valuation procedures. 
  • Unfair Treatment of Retail Investors: Examples of unfair treatment include misclassification of retail investors as wholesale investors, and preferential redemption rights for some investors. 
  • Management of Conflicts of Interests: Conflicts include misalignment of interest between fund manager and investor returns, related party transactions, and treatment of confidential information (in particular, insider trading concerns). 
  • Valuation Uncertainty: Valuations of illiquid assets are based on methodologies and judgements rather than publicly available pricing and may not be independent; this impacts investment entry and exit prices, and also performance measurement and fees. 
  • Illiquidity: Private market investments generally cannot be realised quickly to meet an investor's liquidity needs. 
  • Leverage: ASIC considers that private capital funds are more likely to have vulnerabilities from higher leverage.  

ASIC is already undertaking an examination of private credit and risks for retail investors, including thematic surveillance of retail private credit funds that will include review of governance, disclosure practices, management of conflicts, distribution of products, valuation, and credit risk management. 

ASIC is proposing to focus on private credit as an asset of superannuation fund portfolios, through review of fund financial reporting and audits. This appears to be aimed at collecting and analysing further data about superannuation funds' exposure to private capital assets.  

ASIC is also increasing surveillance of wholesale private capital funds, focusing on governance, management of conflicts, insider trading, protection of confidential information, and fair treatment of investors. Reports in the financial press indicate that this surveillance has commenced.  

The Discussion Paper indicates that a 2025 enforcement priority for ASIC in the private credit sector is focusing on business models designed to avoid consumer credit protections. 

International Precedent as a Case Study for Australia's Private Markets 

With ASIC's views on the regulation of private markets still evolving, international markets provide a relevant benchmark for future regulatory interventions in Australia. The Discussion Paper outlines key global regulatory responses to changes in public and private markets, in the United States, United Kingdom, European Union, Canada, New Zealand, Hong Kong, and Singapore.  

Looking to the United States, the SEC has been particularly active in not only facilitating access to private markets but also increasing transparency and oversight in this sector. In 2023, the SEC introduced rules requiring private funds to disclose quarterly information on areas including fees, performance, earnings, and separate agreements with large investors. While these rules were ultimately overturned by the U.S. Court of Appeals for the Fifth Circuit in 2024, the SEC continues to focus on private capital through its existing investigations and enforcement powers.  

Indeed, in January this year, the SEC brought a civil penalty action against a major private equity firm for its alleged failure to provide complete and accurate information about its transactions, resulting in a resolution involving the firm paying a US$11 million penalty. This is one example of several civil penalty actions brought by the SEC against investment managers and brokerages, who will collectively pay US$63 million in penalties for their failure to keep appropriate records.  

In England, the Financial Conduct Authority is conducting a similar review of private markets—particularly focused on valuation and governance practices—while the European Union has already introduced higher regulatory standards for private funds on these matters, as well as requiring enhanced disclosure requirements with respect to fees.  

We would expect Australian regulators to continue to look to international precedent as it develops in response to the global growth of private markets.

Three Key Takeaways 

  1. ASIC's immediate focus is industry consultation (with submissions due in late April 2025) with a view to assessing whether regulatory settings should be adjusted. There are, however, some enforcement priorities for 2025, where ASIC believes market participants are not complying with the current law. 
  2. ASIC's key concerns appear to be around retail investor protection, and the Discussion Paper asks for comments on whether current financial service laws provide sufficient protection for retail investors investing in private assets. However, ASIC is seeking feedback on regulatory settings generally, including which issues and risks ASIC should focus on as a priority, and noting that ASIC's assessment at this stage is that the key risks are around opacity, conflicts, valuation uncertainty, illiquidity, and leverage in private markets. 
  3. While additional regulation of private markets is a likely eventual outcome of ASIC's review process, changes to regulatory settings are not likely to occur in the near term.
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