The corporate regulator has released guidance around how funders of class actions will fit into the financial services licensing regime that it hopes will “address industry concerns about the workability” of the government’s moves to further restrict litigation funding.
ASIC’s Consultation Paper 345 on litigation funding schemes outlined several areas where it proposed to provide relief for litigation funders from aspects of the managed investment scheme regime that they currently fall under.
The requirement for litigation funders to hold an AFSL came into place in August last year after a surprise announcement from the government in mid-2020, but ASIC has been providing transitional relief for funders from aspects of the regime that are due to expire in April 2022.
The reforms were the subject of a parliamentary inquiry in December that made 31 recommendations in relation to legislative changes to litigation funding, and the government has said it will further consult on these recommendations this year.
ASIC’s paper sets out “definitional guidance for key terms in the MIS regulatory regime as they apply to litigation funding schemes”, as well as granting relief from equal treatment duty in relation to MIS distributions, so that this rule does not apply to distributions of a settlement or judgment sum obtained in connection with a litigation funding scheme.
The paper also proposes to permanently extend relief for litigation funders from the dollar disclosure provisions for MIS in relation to certain commercially sensitive information.
“ASIC is inviting feedback from industry participants and stakeholders about whether the proposed guidance is necessary and adequate, and whether the proposed relief addresses industry concerns about the workability of the MIS regime for litigation funding schemes,” the regulator said.
“In administering the AFSL and MIS regimes for litigation funding schemes, ASIC aims to give effect to the government’s policy intent [and] facilitate the effective operation of the legislative framework by ensuring the workability of the regimes and promoting commercial certainty about their operation.”
The regulator said it would consider any developments following the government’s consultation on the recommendations in the final report from the parliamentary joint committee, and “reassess its approach” to matters in the consultation paper if necessary.
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