AFSLs and ASIC oversight not for us say litigation funders and lawyers
It might be good enough for advisers and financial planning licensees but lawyers and litigation funders are signalling very loudly that they don’t want to be licensed and made answerable to the Australian Securities and Investments Commission (ASIC) via Managed Investment Scheme (MIS) structures.
And, indeed, even the Australian Competition and Consumer Commission is questioning why any significant change is warranted to the current litigation funding regime in circumstances where the competition regulator has perceived it as being overall helpful to consumers in achieving legal redress.
The Joint Parliamentary Committee on Corporations and Financial Services has begun receiving submissions on a legislative proposal to require litigation funders to hold an Australian Financial Services License and to operate on the same basis as a MIS.
However the early submissions from lawyers and even the ACCC make clear that there is real resistance to the licensing move, with one of the pioneers of the Australian litigation funding industry, John Walker making clear that licensing is one thing, but the imposition of MIS structures is another.
Walker is the chair and co-founder of the Association of Litigation Funders of Australia (ALFA).
“I do not oppose funders being subject to oversight by the Australian Securities and Investments Commission (ASIC) through the mechanism of requiring funders to have an Australian Financial Services Licence (AFSL),” he said. “The further step of requiring each funded class action to be treated as a managed investment scheme (MIS) will, however, have consequences that are likely to not be in ‘the interests of Australians’.”
“Class action members are not ‘investing’ in the ‘scheme’, but rather are pooling their causes of action. The primary policy consideration is whether ASIC can add any meaningful oversight of class actions over that of the Court,” Walker said.
“Open classes clearly enable greater access to justice than claims closed to funded members. Also, common fund orders, whilst recently called into question, enable better Court oversight of costs.”
For its part the ACCC has used its submission to urge against significant changes to the litigation funding regime, arguing that recent amendments to the Competition and Consumer ACT (CCA) should be given time to work.
The ACCC said that there were both positives and negatives with respect to how litigation funding impacted the work of the competition regulator but that, on balance, “the current class action regulatory settings appropriately balance these positives and potential negatives”.
“As such, the ACCC recommends the inquiry carefully consider any changes that may make class actions less available as doing so risks preventing access to redress for a wide range of consumers.”
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