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Employers welcome greater oversight of litigation funders

Maja Garaca Djurdjevic
Maja Garaca Djurdjevic
22 May 2020 1 minute readShare
Employers welcome greater oversight of litigation funders

Employers have welcomed the Treasurer’s move to impose greater regulatory oversight on litigation funders by requiring them to hold an Australian financial services licence and comply with the managed investment scheme regime.

The Treasurer has been praised by employers for announcing that litigation funders will be regulated under the Corporations Act, a move heralded as a safeguard for Aussie jobs and businesses from the risk of class action lawsuits funded by unregulated parties.

Litigation funders are currently exempt from holding an AFSL and being categorised as a managed investment scheme. As a result, they do not face the same regulatory scrutiny and accountability as other financial services and products under the Corporations Act.


But following a spike of 325 per cent in class actions in the Federal Court in the past decade, Treasurer Josh Frydenberg said on Friday litigation funders will come under greater scrutiny through the removal of previous exemptions, requiring them to obtain an AFSL from the Australian Securities and Investments Commission.

AFSL holders are obliged to act honestly, efficiently and fairly; maintain an appropriate level of competence to provide financial services; and have adequate organisational resources to provide the financial services covered by the licence.


“Removal of these exemptions will also require greater transparency around the operations of litigation funders in Australia,” Mr Frydenberg said.

The amendments are expected to take effect three months from 22 May through regulation, meaning a bill won’t be put to Parliament to amend the Corporations Act. 

Applauding Mr Frydenberg’s move, the Business Council of Australia said the move enables more funding to go towards putting Australians safely back to work.

“Every dollar spent defending against opportunistic class actions is a dollar that is not spent on creating a new job or saving an existing one,” said Business Council chief executive Jennifer Westacott.



“Every minute spent defending a class action is a minute that is not spent on growing a business and getting people back to work.”

Ms Westacott argued that Australia’s recovery must be jobs-focused, meaning “every resource businesses have should be focused on getting Australians safely back to work and creating new opportunities”.

“Of course, businesses must follow the law and act responsibly, but keeping markets well informed and protecting Australians from opportunists are not mutually exclusive,” Ms Westacott added.

The announced changes complement the government’s recent move to set up a parliamentary inquiry into litigation funding, with the Joint Committee on Corporations and Financial Services due to report by 7 December 2020.

Employers welcome greater oversight of litigation funders
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Maja Garaca Djurdjevic
Maja Garaca Djurdjevic

Maja Garaca Djurdjevic is the editor of My Business. 

Maja has a decade-long career in journalism across finance, business and politics. Now a well-versed reporter in the SME and accounting arena, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies and enabling citizens to influence decision-making.

You can email Maja on [email protected] 

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