Private Lenders & Non-Bank Finance: Compliance Roadmap for ASIC’s 2025-26 Strategic Priorities14 min read

Introduction

The Australian Securities and Investments Commission (ASIC) has established its strategic priorities for 2025-26, outlining a clear enforcement agenda for the Australian capital market. These priorities are designed to protect consumers and uphold market integrity, reflecting the regulator’s response to emerging risks and ongoing economic pressures.

With ASIC’s heightened enforcement stance and increased investigatory activity, firms in the private market must pay close attention to these 2025-26 priorities. This guide provides a detailed compliance roadmap, focusing on the specific implications for private lenders and non-bank finance companies to help manage regulatory risk effectively.

Interactive Tool: Check Your Private Lender Compliance & ASIC Risk Level

ASIC’s Heightened Enforcement Stance in 2026

ASIC has demonstrated a significant escalation in its enforcement activities, signalling a more aggressive regulatory environment for 2025-26. Over the last twelve months, ASIC has notably increased its actions by:

• Doubling the number of new investigations it has undertaken.
• Nearly doubling the number of new matters filed in court.

Consequently, this heightened activity indicates that private lenders and non-bank finance companies should anticipate a continuation of highly active, court-based enforcement and recovery actions.

This intensified approach is part of a strategy to deliver strong, visible, and active enforcement outcomes. The regulator is not only initiating more investigations but is also focused on:

• Securing record penalties against non-compliant entities.
• Increasing criminal prosecutions to deter financial misconduct.

This commitment has resulted in lengthy prison sentences for financial fraud, underscoring the serious consequences of non-compliance with its strategic priorities.

ASIC’s appetite for litigation is clear, with a focus on creating a deterrent effect across the capital market. By pursuing public outcomes through court action, the regulator aims to achieve key objectives, including:

• Prompting a rapid reprioritisation of compliance within peer entities.
• Targeting “big brands” to send an unequivocal message about the importance of adhering to regulatory standards.

Furthermore, ASIC’s enforcement focus extends beyond corporate entities to include individuals in senior positions.

There is a clear expectation from the public and the regulator that senior leaders will be held accountable for misconduct occurring within their organisations. Ultimately, this emphasis on individual responsibility is a critical component of ASIC’s enforcement stance in the private market and beyond.

A Deep Dive into the New Priority on Poor Private Credit Practices

Why the Private Market & Credit Sector Is Under Scrutiny in 2025-26

The inclusion of private credit among ASIC’s 2025-26 strategic priorities stems from the sector’s rapid expansion. As traditional bank lending has tightened, the private credit market has grown significantly, attracting both retail and wholesale investors and playing a larger role in the economy.

Consequently, this growth has brought emerging risks and concerns about poor practices within the industry. To address these issues, ASIC has connected this scrutiny to the broader context of consumer cost-of-living pressures with the following goals:

• Aiming to protect investors and ensure market integrity.
• Signalling its intent to take enforcement action to stamp out misconduct.
• Supporting confident, informed participation in the capital market.

Key Compliance Actions for Your Private Lending Operations

Given ASIC’s heightened focus on the private market, private credit providers must ensure their practices comply with all applicable regulatory compliance. This involves a thorough review of internal systems and enhancing them where necessary to meet the regulator’s expectations for 2025-26.

Key areas that demand immediate attention include:

• Governance Processes: Strengthen oversight of your lending activities. This includes reviewing loan structuring and documentation, ensuring evidence packs are complete and accurate, and establishing clear lines of accountability for compliance failures
• Business Methodologies: Assess your entire operational workflow, from client onboarding to debt collection. Your methodologies must be fair, transparent, and lawful, avoiding any practices that could be deemed predatory or exploit consumers facing financial difficulty.
• Disclosure Practices: Enhance the clarity and completeness of information provided to investors and borrowers. This is particularly crucial for fund-level reporting, where transparency around performance, risks, and valuation governance is essential for building and maintaining trust.
• Regulatory Response Procedures: With ASIC increasing its surveillance and investigations, it is critical to update and test your procedures for responding to regulatory inquiries. Having a clear plan ensures you can cooperate effectively and manage potential risks.

The Critical Link Between Financial Reporting & Private Market Integrity

ASIC’s Rationale for Focusing on Financial Reporting

ASIC’s strategic priorities for 2025-26 include a strong focus on financial reporting misconduct, directly linked to transparency concerns in the private market. The regulator has emphasised that reliable financial information is more critical than ever as entities with unlisted assets, such as private credit funds, assume a larger role in the economy.

This heightened scrutiny aims to bolster transparency and accountability across both listed and unlisted sectors.

As the private credit market expands, accurate reporting becomes essential for informed decision-making by stakeholders and for maintaining the integrity of the capital market. Consequently, ASIC is stepping up enforcement action against entities that fail to meet their financial reporting obligations.

Strengthening Your Firm’s Reporting & Valuation Governance

In response to ASIC’s focus, private credit providers must assess their internal governance frameworks to ensure compliance. This involves a thorough review of documentation standards, reporting workflows and valuation methodologies to stand up to regulatory scrutiny.

Key areas that require specific attention to strengthen your firm’s reporting and valuation governance include:

• Accounting Controls: Firms should review their accounting controls to ensure they are comprehensive and effective, including maintaining detailed evidence packs and clear documentation standards that support all financial statements and disclosures.
• Impairment Assessments: Regular and rigorous assessments of asset impairment are crucial. Lenders need to have a clear process for identifying and accounting for potential losses, reflecting a true and fair view of the fund’s financial health.
• Valuations: Establishing strong valuation governance is paramount, particularly for unlisted or illiquid assets common in the private market. This involves implementing clear methodologies, ensuring independent oversight where appropriate and documenting the valuation process to ensure transparency and accuracy.

Case Study: The Shield & First Guardian Master Funds Collapse

An Overview of the Alleged Misconduct & Failures

The collapse of the Shield and First Guardian Master Funds has been elevated to a dedicated enforcement priority for 2025-26, representing one of ASIC’s largest and most complex investigations. With more than 40 staff assigned to the case, the regulator is focused on holding those responsible to account for the significant losses incurred by investors.

The collapses affected approximately 11,800 Australians who had invested their retirement savings, with 6,000 in the First Guardian fund and 5,800 in the Shield fund.

Consequently, the core allegations being investigated by ASIC centre on severe compliance and oversight failures. Specifically, these include:

• Claims of asset mismanagement.
• The misrepresentation of fund performance.
• The provision of misleading financial advice to thousands of investors.

Critical Due Diligence Lessons for Private Lenders & Investors

The fallout from the Shield and First Guardian collapse provides critical lessons on the importance of legal due diligence for all participants in the financial services industry. Furthermore, ASIC’s investigation demonstrates that scrutiny extends far beyond the fund trustees to encompass a wide range of associated entities.

The regulator’s enforcement actions highlight the interconnected risks across the capital market, with proceedings initiated against various parties involved with the funds. These include:

• Research Houses: A ratings agency is being sued for providing a favourable rating to the Shield Master Fund that allegedly fell short of expected standards.
• Financial Advisers: Legal action has been taken against a financial adviser for failures related to best interest obligations and risk management systems.
• Lead Generators: A lead generation company is also facing legal action in connection with the collapse.

Enduring Priorities & Their Impact on the Private Market for 2025-26

Upholding Directors’ Duties & Governance Standards

Alongside its new strategic priorities for 2025-26, ASIC maintains several enduring priorities that represent the fundamental pillars of its regulatory focus. One of the most critical for the private market is the continued emphasis on preventing governance and directors’ duties failures.

This priority serves as a reminder to private lenders and non-bank finance companies of their core obligations. Strong governance frameworks are essential for:

• Effectively managing risk across operations.
• Consistently ensuring compliance with regulatory standards.
• Maintaining the overall integrity of the capital market.

As a result, ASIC will continue to take action against failures in this area.

Protecting Financially Vulnerable Consumers

Another key enduring priority for ASIC is addressing misconduct that poses a high risk of significant consumer harm. The regulator places particular emphasis on conduct that targets financially vulnerable consumers, which is a central aspect of its mandate.

For the private credit sector, this means that business models and lending practices are under constant scrutiny to ensure they do not exploit individuals facing financial difficulty. As the private market expands, ASIC remains focused on:

• Protecting consumers from predatory practices.
• Ensuring the financial system remains fair and efficient for all Australians.

Conclusion

ASIC’s 2025-26 strategic priorities signal a period of heightened regulatory scrutiny for the private market, with a clear focus on poor private credit practices, financial reporting integrity, and governance failures. For private lenders and non-bank finance companies, understanding these priorities and ASIC’s aggressive enforcement stance is essential for mitigating significant regulatory risk.

To ensure your operations are fully compliant with these regulatory changes, contact our private lender and non-bank finance lawyers at GRM Law for a consultation today. Our experts provide trusted expertise and specialised services tailored to the private lending sector, helping you strengthen your compliance frameworks and protect your business.

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