On 19 December 2022, ASIC announced several amendments to existing legislative instruments that provided relief which was not covered by the Corporations Amendment (Litigation Funding) Regulations 2022 (Cth) (Regulations). The Regulations came into effect on 10 December 2022 and bring the status of litigation funding schemes under the Corporations Act 2001 (Cth) in line with the law before 22 August 2020.
The Regulations, which were released for public consultation between 2 September 2022 and 30 September 2022, provide litigation funding schemes with an express exemption from the Managed Investment Scheme (MIS) regime contained within Chapter 5C of the Corporations Act 2001 (Cth) (Act). The Regulations further exempt litigation funding schemes from the Australian Financial Services Licence (AFSL) requirements, product disclosure regime and anti-hawking provisions contained within the Act. The Regulations recognise that the MIS and AFSL regimes were never intended to regulate the litigation funding industry in Australia.
The amendments introduced under the Regulations also have the effect of:
However, the Regulations do not affect existing obligations for litigation funders to have adequate practices in place to manage conflicts of interest.
The ASIC relief includes the following:
The changes to the relief have been made by ASIC Corporations & Credit (Amendment and Repeal) Instrument 2022/1032, and are said by ASIC to have been introduced for the purpose of providing “certainty” for funders, lawyers and members of litigation funding (and proof of debt) funding arrangements while the Government considers its policy position in respect of these types of arrangements.
ASIC’s administrative action is consistent with the policy behind the Regulations, and like the Regulations, it serves to provide further clarity to the litigation funding industry, something that is much needed after more than two years of regulatory uncertainty.
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