AICD CEO and Managing Director, Angus Armour, said, “The AICD has long called for more robust regulation of litigation funders to create more transparency and protections for the individuals involved. This move is a significant first step in addressing concerns about Australia’s securities class action industry.”
Today, Treasurer Josh Frydenberg announced that litigation funders will be subject to greater regulatory oversight by being required to hold an Australian Financial Services Licence (AFSL) and comply with the managed investment scheme regime.
“The COVID-19 environment has highlighted long standing issues with opportunistic securities class actions that are not focussed on access to justice as much as profit for funders’ investors. It is this environment which has triggered the current crisis in the Australian D&O market,” Mr Armour said.
“The upcoming Parliamentary Inquiry into litigation funding and class actions is another opportunity to look closely at how the system is working and whether it is operating in the public interest, and to make any necessary changes.”
The AICD continues to call for a temporary moratorium on securities class actions in relation to earnings guidance or forward-looking statements about company performance that are made in the context of the COVID-19 pandemic. The AICD argues that instead, ASIC and the ASX should be expected to vigorously enforce disclosure obligations where they have concerns.
“This Government step comes at a time when business leaders are working hard to save jobs and companies from collapse. They do not need to be looking over their shoulders for lawyers and funders looking to capitalise on the uncertainty created by the pandemic.
“We need our regulators enforcing our strict disclosure laws, not lawyers and funders seeking to profit from this unprecedented crisis,” Mr Armour said.
Media Contact: Maegen Sykes 0439 167 567