Litigation funders must hold an Australian financial services licence for any funding arrangements they enter into with litigants after August 22.

In May, the Australian government announced plans to licence litigation funders and at the end of July regulations under the Corporations Act were published. The regulations exempt pre-August 22 schemes.

Under Corporations Amendment (Litigation Funding) Regulations 2020 funders of “litigation funding schemes” will need to obtain an AFSL in order to deal in or provide financial product advice in relation to an interest in a litigation funding scheme.

Litigation funding schemes may be classified as managed investment schemes, in which case further regulation will apply.

The litigation funder can operate under another entity’s AFSL as an authorised representative.

Anti-hawking provisions apply to interests in litigation funding schemes.

A member of a scheme will have to be given a product disclosure statement and periodic statements.

ASIC will have the power to grant exemptions. Two exemption already in place apply to litigation funding schemes in insolvency matters and arrangements in actions involving a single plaintiff.