On 31 May, the Australian Law Reform Commission (ALRC) released a Discussion Paper, Inquiry into Class Action Proceedings and Third-Party Litigation Funders, in relation to its inquiry into class action proceedings and third-party litigation funders.
One of the key proposals in the discussion paper is for the Corporations Act to be amended to require third party litigation funders operating in Australia to obtain and maintain a ‘litigation funding licence’ which attracts similar obligations to an AFSL. This proposal echoes findings made by the Productivity Commission in 2014 that litigation funders be specifically licenced to ensure they hold adequate capital to manage their financial obligations. Presently, litigation funders are exempted from the requirement to hold an AFSL provided they have adequate processes in place to manage conflicts of interest. Litigation funding is also exempted from the Consumer Credit Code and the definition of a managed investment scheme. The Commission has proposed that ASIC would be the appropriate regulator for litigation funders under the proposed licensing regime.
Submissions are due by 30 July.