The Morrison government has indicated it will be slapping litigation funders with tougher regulatory standards, with financers to be required to hold an Australian Financial Services Licence and comply with the managed investment scheme regime.
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.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
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