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Litigation Funding

Post-implementation Review – Treasury

In July 2013 the then Government introduced the Corporations Amendment Regulation 2012 (No 6) (the Regulation) to exclude litigation funding schemes and arrangements from the definition of a managed investment scheme (MIS) under the Corporations Act 2001. The Regulation also provides an exemption from the requirement to hold an Australian financial services licence (AFSL) for persons providing funding as part of either a single‑party or multi‑party litigation, as long as they have appropriate processes in place for managing conflicts of interest. A Regulation Impact Statement was required at the time the decision was made, but was not prepared. Consequently a post-implementation review (PIR) was required. A PIR was completed by the Treasury in consultation with its Ministerial Advisory Council and was assessed as compliant by the Office of Best Practice Regulation. The PIR concluded that the Regulation has been successful in providing certainty that litigation funders are not subject to the provisions of the Corporations Act that impose registration, licensing, conduct and disclosure requirements. Third party litigation funders have continued to fund class actions in Australia and the number of litigation funders operating in the Australian market has increased. The PIR also found the changes reduced regulatory burden by $1.785 million per annum. This reduction was agreed with the OBPR.