Any litigation funding scheme entered into on or after 22 August 2020 will be subject to strict new requirements. In particular, the scheme must be registered (provided it has more than 20 members or is promoted by a person who is in the business of promoting managed investment schemes) and must be operated by a “responsible entity”, being an Australian public company that holds an AFSL authorizing the entity to operate the scheme. The responsible entity is subject to obligations under law to, among other things:
- act honestly and in the best interests of members;
- exercise the degree of care and diligence that a reasonable person would exercise if they were in the responsible entity’s position; and
- report breaches to ASIC.
The responsible entity will also be subject to the obligations that apply to all AFSL holders, including to do all things necessary to ensure that the financial services are provided efficiently, honestly and fairly; to take reasonable steps to ensure that its representatives comply with financial services laws; and to have adequate risk management systems in place.