How can the Instrument support you?
The Instrument, which commenced on 22 August 2020, provides exemptions to responsible entities of litigation funding schemes from certain provisions in Chapter 5C and 7 of the Corporations Act 2001 (Cth) (the Act) to address practical difficulties litigation funders may face when transitioning to the new regime.
The obligations arising under the Act which litigation funders are provided relief from under the Instrument include:
- the provision of a Product Disclosure Statement (PDS) to ‘passive’ members of open litigation funding schemes – on the condition the PDS is available on the scheme operator’s website and referred to in advertising material;
- the obligation to regularly value scheme property;
- the statutory withdrawal procedures for members who withdraw from a class action under court rules; and
- the requirement to disclose detailed fees and costs information and information about labour standards or environmental, social or ethical considerations.
ASIC’s No-Action Position
ASIC is aware of the difficulties responsible entities of registered litigation funding schemes may encounter when complying with the obligations to set up and maintain member registers under Chapter 2C of the Act in relation to representative proceedings in which there are passive general members who cannot be individually identified.
Therefore, ASIC has adopted a ‘no-action’ position in relation to the obligations under sections 168 and 169 of the Act for litigation funders. The no-action position means that ASIC will not take regulatory action in relation to a breach of these sections. The purpose of this position is to provide an indication as to the future regulatory action ASIC might take.
What steps to take now?
ASIC is urging litigation funders to contact the them if they have any concerns about their ability to comply with the Act, with particular regard to PDSs, scheme constitutions and compliance plans to ensure a smooth transition to the new regime.
- Litigation funders are no longer exempt from the Australian Financial Services Licensing regime;
- Managed Investment Scheme regulations;
- Corporations Amendment (Litigation Funding) Regulations 2020;
- ASIC Corporations (Litigation Funding Schemes) Instrument 2020/787;
- Explanatory Statement; and
- ASIC’s No-Action Position.
If you require assistance understanding your obligations under this transitional regime, please contact us.