When Private Doesn’t Mean Lightly Regulated

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Welcome to Unlocking Liquidity, the podcast from PrimaryMarkets that brings the dynamic world of private capital to life. Each week, we dive into the trends, opportunities and challenges shaping today’s investment landscape, from emerging asset classes and market innovation through to strategies for navigating liquidity in unlisted markets. Whether you’re an experienced investor, a dealmaker, or simply curious about private markets, Unlocking Liquidity offers analysis and real-world insights to help you make sense of complexity and stay ahead of what’s next.

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In private markets, there’s a common assumption that “private” means fewer rules, less oversight, and a more relaxed regulatory environment. But that narrative doesn’t hold up under scrutiny. Behind every capital raise, every secondary trade, and every investor allocation sits a structured framework of compliance, governance, and regulatory oversight.

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In this episode, we unpack the reality of private markets in Australia and beyond, where regulation hasn’t disappeared, it has simply evolved. From ASIC’s role in monitoring capital flows to the responsibilities placed on wholesale and sophisticated investors, we explore why private markets are not lightly regulated, just differently regulated. And more importantly, why structure, not simplicity, is what ultimately defines successful private market participation.

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There is a persistent misconception in capital markets that “private” equates to “lightly regulated.” It is an idea that has gained traction as private capital has expanded globally, with more companies choosing to stay unlisted for longer and more investors allocating to private assets. The narrative is appealing. Fewer disclosure obligations, less scrutiny, more flexibility, and faster execution. Compared to the highly visible and rules-intensive environment of public markets, private markets can appear streamlined, even permissive.

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But this perception is incomplete and, in many cases, dangerously misleading.

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In reality, private markets operate within a dense and highly structured regulatory framework. The distinction is not between “regulated” and “unregulated,” but between different forms of regulation, applied in different ways, to different investor groups. In Australia in particular, the regulatory architecture governing private capital formation, secondary trading, and investor access is both sophisticated and enforced.

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For wholesale and sophisticated investors, understanding this distinction is critical. Private markets do offer flexibility and efficiency, but they do so within clearly defined legal boundaries. The opportunity lies not in avoiding regulation, but in navigating it intelligently.

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At the core of the misunderstanding is the assumption that regulatory burden is purely a function of visibility. Public companies, by definition, raise capital from retail investors and therefore must comply with continuous disclosure obligations, audited reporting, and strict governance frameworks. This creates a highly transparent but also highly regulated environment.

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Private companies, by contrast, do not raise capital from the general public. This is the key distinction. They operate under exemptions from certain disclosure requirements, but these exemptions are conditional and tightly controlled.

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In Australia, the Corporations Act and the oversight of the Australian Securities and Investments Commission (ASIC) govern how capital can be raised and traded, regardless of whether a company is listed or unlisted. The difference lies in who the offer is made to and how it is structured.

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The general rule is clear: when issuing securities, disclosure is required unless a valid exemption applies. These exemptions include offers to wholesale or sophisticated investors, small-scale offerings, or offers to existing shareholders. They are not loopholes. They are deliberate regulatory mechanisms designed to balance investor protection with capital formation.

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For example, the well-known “2/20/12” rule allows companies to raise up to $2 million from no more than 20 investors over a 12-month period without a formal disclosure document. This is not deregulation. It is a calibrated exemption, with strict limits on both capital raised and investor participation.

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Beyond these exemptions, the regulatory obligations remain significant.

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Even in private markets, companies do not operate outside the regulatory perimeter. ASIC maintains a central role in overseeing company conduct, capital raising, and corporate governance.

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Companies must maintain detailed share registers, report changes to share structures, and notify ASIC of share issuances within defined timeframes. For example, any share issue must be reported within 28 days, including details of pricing, class and allocation. These requirements ensure that ownership and capital structure remain transparent at a regulatory level, even if not publicly disclosed.

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Similarly, proprietary companies must maintain accurate records of shareholders and report changes to ASIC, ensuring that the regulator retains visibility over ownership dynamics.

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For larger proprietary companies, the compliance burden increases materially. Companies that meet certain thresholds—such as revenue, assets, or employee numbers—are required to prepare audited financial statements and lodge them with ASIC annually. This introduces a level of accountability and governance that mirrors aspects of public market regulation, albeit without the same level of public dissemination.

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In other words, private does not mean invisible. This means being selectively transparent, with regulators maintaining oversight even where public markets do not.

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One of the clearest areas where the “light regulation” myth breaks down is in fundraising.

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Any company seeking to raise capital in Australia must comply with strict fundraising laws. Disclosure documents such as prospectuses or offering information statements are required unless an exemption applies. These documents must be lodged with ASIC before capital can be raised.

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Even where exemptions are used, such as wholesale investor offers, the process is still governed by rules around investor qualification, marketing conduct, and record-keeping. Advertising restrictions, anti-hawking provisions, and licensing requirements all continue to apply.

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This is particularly relevant for platforms operating in the private market ecosystem. Any facilitation of capital raising or secondary trading must occur within the framework of an Australian Financial Services Licence (AFSL), ensuring that investor protections and market integrity standards are upheld.

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The implication is clear. Private capital formation is not an informal process. It is a structured activity, governed by law, monitored by regulators, and subject to enforcement.

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If anything, regulatory scrutiny of private markets is increasing, not decreasing.

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Recent ASIC reviews and enforcement actions have highlighted concerns around transparency, valuation practices and conflicts of interest in private markets, particularly in areas such as private credit. The regulator has emphasised the need for clearer disclosure of fees, margins and risks, even within wholesale investor segments.

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In 2026, ASIC intensified its focus on private credit markets, requesting detailed disclosures from lenders regarding interest rates, fees and investor returns, as well as scrutinising marketing materials and compliance practices. This reflects a broader trend: as private markets grow in scale and systemic importance, regulatory expectations rise alongside them.

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Earlier reviews have also pointed to issues such as opaque structures, valuation uncertainty, and conflicts of interest, reinforcing the need for stronger governance and transparency frameworks.

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This is not a shift towards public-market style regulation, but it is a clear signal that private markets are no longer operating in the shadows. They are becoming a central component of the financial system, and regulators are responding accordingly.

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A key pillar of the private market regulatory framework is the distinction between retail and wholesale investors.

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Wholesale and sophisticated investors are assumed to have the financial capacity, experience, and access to advice necessary to assess investment risks independently. This assumption underpins many of the exemptions that enable private capital formation.

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However, this is not a relaxation of regulation. It is a reallocation of responsibility.

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Instead of relying on mandated disclosure documents, wholesale investors are expected to conduct their own due diligence, negotiate terms, and assess risk. The regulatory framework shifts from prescriptive disclosure to principles-based conduct, with an emphasis on fair dealing, transparency, and fiduciary responsibility.

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For investors operating in this space, the implications are clear. Access to private opportunities comes with an obligation to engage more deeply with the underlying investment. Governance, structure, and liquidity considerations become critical factors, not afterthoughts.

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One of the most important developments in private markets has been the emergence of structured secondary trading environments.

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Historically, liquidity in private assets was episodic and opaque, often dependent on bilateral transactions or corporate events. Today, platforms and issuer-led trading mechanisms are introducing structure, governance, and visibility into secondary markets.

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This is where regulation and innovation intersect.

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Secondary trading in private markets must comply with the same regulatory principles as primary issuance, including licensing, investor qualification, and transaction reporting. Structured environments enable this compliance while also delivering improved liquidity outcomes.

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For issuers, this means the ability to define trading windows, control participation, and maintain oversight of pricing and transactions. For investors, it provides access to liquidity within a compliant framework, rather than relying on informal or unregulated channels.

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The concept is simple but powerful. Liquidity in private markets is not a byproduct of listing. It is a function of structure.

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Australia offers a particularly instructive example of how private markets can be both dynamic and well-regulated.

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The regulatory framework balances capital formation with investor protection, enabling companies to raise funds efficiently while maintaining market integrity. The use of exemptions, the role of ASIC, and the distinction between investor types all contribute to a system that is flexible but not permissive.

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At the same time, the increasing allocation of capital to private assets by superannuation funds and institutional investors is bringing greater scrutiny to the sector. Issues such as valuation transparency, liquidity risk, and governance standards are becoming central to the regulatory agenda.

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This is not a constraint on growth. It's a maturation of the market.

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The idea that private markets are “lightly regulated” is not just inaccurate. It is unhelpful.

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It obscures the real value proposition of private markets, which is not regulatory avoidance but structural flexibility. It also underestimates the importance of compliance, governance, and transparency in building sustainable capital markets.

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For issuers, the opportunity lies in designing capital structures and liquidity pathways that align with both investor expectations and regulatory requirements. For investors, it lies in accessing differentiated opportunities within a framework that protects market integrity.

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Private markets are not the absence of regulation. They are a different expression of it.

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As private markets continue to grow in scale and relevance, the distinction between public and private will become less about regulation and more about structure.

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The future of private capital will not be defined by how lightly it is regulated, but by how effectively it is organised. Platforms, governance frameworks, and compliant trading environments will play an increasingly central role in enabling liquidity, transparency, and investor confidence.

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For wholesale and sophisticated investors, this is not a constraint. It is an advantage.

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Because in private markets, the real edge is not access alone. It is access with structure.

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And structure, more than anything else, is what turns private capital into a scalable, investable asset class.

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For companies and managed funds that are not listed on a stock exchange, the PrimaryMarkets trading Platform is an ideal way to facilitate the off-market sale of shares in your company and units in managed funds.

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PrimaryMarkets is a flexible and evolving Platform that responds in real time to an ever-changing investment environment. In doing so, it provides sophisticated investors with access to companies that are shaping the future in a wide variety of industries and sectors. We provide access to opportunities previously only accessible to institutional investors. In addition to trading, PrimaryMarkets helps companies raise capital from our global investor database.

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PrimaryMarkets exemplifies how innovation can transform the way we invest, trade and raise capital by breaking down traditional barriers, providing liquidity solutions and promoting transparency.

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As the Platform continues to grow and evolve, it promises to unlock even more opportunities for investors and companies shaping the future of economies.

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And that brings us to the end of this episode of Unlocking Liquidity. Thanks for spending your time with us, we hope today’s conversation gave you a fresh perspective on private markets and how liquidity is evolving. If you enjoyed the episode, please follow or subscribe wherever you listen, and feel free to share it with someone who’d get value from it. For more insights, opportunities and episodes, visit PrimaryMarkets.com. Until next time, thanks for listening, and we’ll see you in the next conversation.