On 22 May 2020, the Treasurer, the Hon Josh Frydenberg MP, announced Litigation funders would be regulated under the Corporations Act, requiring them to hold an Australian Financial Services Licence (AFSL) and comply with the managed investment scheme regime, commencing three months from the date of the announcement.
The amendments to the regulations are intended to provide greater transparency around the operations of litigation funders in Australia, and will require them 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.
As this measure was likely to have major impacts on affected businesses and individuals, a Regulation Impact Statement (RIS) was required to be prepared, but was not completed and assessed by the Office of Best Practice Regulation (OBPR) prior to the final decision. Consequently, the OBPR has assessed the RIS process for the proposal as insufficient with the Australian Government’s Regulatory Impact Analysis requirements.
Accordingly, a post-implementation review is required to be completed within two years of its implementation.
The Treasury has subsequently prepared a RIS which is published here for transparency purposes only. The OBPR has not assessed this RIS.