A statement from the Treasurer Josh Frydenberg on Friday revealed the class action funders are set to be regulated under the Corporations Act by March next year at the latest.
The financers are currently exempt from holding an AFSL and being categorised as a managed investment scheme, leaving them free of the same regulatory scrutiny and accountability as other financial services and products under the Corporations Act.
With the removal of their exemption, litigation funders will be required to obtain an AFSL from ASIC and to uphold the license obligations of acting honestly, efficiently and fairly; maintain an appropriate level of competence to provide financial services and have adequate organisational resources to provide its financial services.
“Removal of these exemptions will also require greater transparency around the operations of litigation funders in Australia,” Mr Frydenberg said.
The amendments to the regulations will take effect three months after the final report from the inquiry by the parliamentary joint committee on corporations and financial services into litigation funding and the regulation of the class action industry. The committee is due to report by 7 December.
The reforms are set to take place after a wave of class actions has been launched against financial institutions. More recent claims from earlier this year include actions against IOOF, Westpac, AMP and ANZ. Some of the companies faced multiple class actions.
