FSC reviews guidance for private credit managers
The FSC has launched an assessment of its DDO template to explore whether tailored private credit guidance should be introduced, following ASIC’s latest surveillance report on private credit funds.
On November 10, ASIC released the results of its thematic surveillance into private credit funds, its second in a year. The report found improvements in some areas but also identified several areas where work is still needed.
The report highlighted complex structures and arrangements that masked conflicts and fees, including related-party arrangements. It also found incomplete or inconsistent fee disclosure, with only two of 22 funds passing on the full economic benefits of interest earned and borrower fees to investors.
A review revealed that retail funds often failed to provide clear explanations of critical details, such as non-performing or distressed assets, which are essential for investors to make informed decisions. Nine out of 12 funds were found lacking in this regard.
Following the report, the FSC is reassessing its DDO templates for fund managers, considering ASIC’s recent findings. They will evaluate the need for more detailed guidance specifically tailored to private credit.
Starting July 1, 2027, the FSC’s Standard will become mandatory for its fund management and superannuation member firms. The council will also collaborate with ASIC on a consultation to extend Regulatory Guide 45, which aims to improve disclosure for retail investors, to all private credit funds by next year.
According to FSC CEO Blake Briggs, ASIC’s report shows the risks associated with private credit, particularly in the distribution and marketing of retail products, as well as deficiencies in target market determinations. He acknowledged that while some industry players have enhanced their standards, there is still room for improvement across the sector.
Blake Briggs emphasized the need for robust governance, transparency, and proper distribution to sustain investor trust as the private credit industry expands. He highlighted its key role in funding Australian businesses and housing projects, supporting economic growth, and providing investors with portfolio diversification opportunities.
The FSC’s actions are a response to the report’s findings, which showed that there is still work to be done to improve practices in the private credit sector. They will continue to work with ASIC to address the issues identified in the report and to ensure that investors are protected.
