Australian Securities and Investments Commission (ASIC) has announced its intention to grant transitional relief to lawyers and litigation funders involved in legal proceedings structured as funded class actions.

The relief, which will apply until 30 June 2010, is from the requirements that would otherwise apply to funded class actions as 'managed investment schemes' under Chapter 5C and Chapter 7 of the Corporations Act 2001 (the Act). These requirements include:

• appointing an AFS licensed public company as 'responsible entity' to operate the scheme
• dopting a complying constitution and compliance plan for the scheme
• registering the scheme with ASIC
• preparing a Product Disclosure Statement for the scheme
• providing ongoing disclosure to members of the scheme.

The Full Federal Court's recent decision that a funded class action was a 'managed investment scheme' within the meaning of the Act has the potential to disrupt the conduct of a number of class actions currently underway.

ASIC will grant transitional relief to avoid any disruption that could adversely impact plaintiffs in those actions, or interfere with the timely and efficient conduct of the subject litigation. The relief will allow time for Government and ASIC to consider and consult on how funded class actions should be regulated under the Act in future. Depending on the outcome of that process, existing class actions may need to be restructured to meet the requirements of the Act by the end of the relief period.

Relief will generally be granted, on individual application, to lawyers and litigation funders involved in the conduct of class actions that were commenced before 4 November 2009.

5 November, 2009