ASIC has revised the duration of relief relating to litigation funding schemes.
ASIC Corporations (Amendment) Instrument 2021/116 (amending instrument) amends ASIC Corporations (Litigation Funding Schemes) Instrument 2020/787 (primary instrument) by changing the sunset date of the primary instrument. The primary instrument will now sunset on 22 August 2025.
The primary instrument commenced on 22 August 2020 and provided exemptions from certain provisions in Chapters 5C and 7 of the Corporations Act 2001 for litigation funding schemes. The relief was provided to facilitate the implementation of the (then) new regulatory framework for litigation funding schemes.
The amending instrument introduces a five-year sunset date for the primary instrument, having regard to:
- concerns with the original term of the primary instrument raised by the Senate Standing Committee for the Scrutiny of Delegated Legislation, which assesses all legislative instruments subject to disallowance, disapproval or affirmative resolution by the Senate; and
- the overlap between the matters addressed by the primary instrument and the recommendations in the final report of the Parliamentary Joint Committee inquiry into litigation funding and the regulation of the class action industry (December 2020), which the Government is yet to respond to.
The primary instrument was due to sunset on 1 October 2030 in accordance with the default sunsetting arrangements for legislative instruments provided for under the Legislation Act 2003.
ASIC formed the view that, having regard to the above circumstances, it was preferable to amend the term of the primary instrument to five years.
ASIC will continue to monitor and if necessary, further modify the primary instrument to ensure that it is operating effectively and consistently with the policy intent of the legislative framework applicable to litigation funding schemes.
From 22 August 2020, operators of litigation funding schemes generally need to hold an Australian financial services licence, and litigation funding schemes will generally be subject to the managed investment scheme regime under the Corporations Act 2001.
The primary instrument made by ASIC provided for exemptions from certain provisions in Chapters 5C and 7 of the Corporations Act 2001 for litigation funding schemes, including:
- the obligation to give a Product Disclosure Statement (PDS) to ‘passive’ members of open litigation funding schemes on the condition that the PDS is available on the scheme operator’s website and referred to in advertising material;
- the obligation to regularly value scheme property;
- the statutory withdrawal procedures for members who withdraw from a class action under court rules;
- the requirement to disclose detailed fees and costs information and information about labour standards or environmental, social or ethical considerations.
For more information, see:
- ASIC Corporations (Amendment) Instrument 2021/116 and Explanatory Statement
- ASIC Corporations (Litigation Funding Schemes) Instrument 2020/787, Explanatory Statement and ASIC media release 20-192MR
- Corporations Amendment (Litigation Funding) Regulations 2020
- ASIC information on litigation funding