ASIC Corporations (Amendment) Instrument 2022/264

Overview

The ASIC Corporations (Amendment) Instrument 2022/264 was enacted to address the need for continued relief from dollar disclosure requirements for litigation funding schemes, as originally introduced by the ASIC Corporations (Amendment) Instrument 2021/292. This legislative instrument is made under the authority of the Australian Securities and Investments Commission (ASIC) and is designed to align with the existing regulatory framework for litigation funding schemes established by the Corporations Act 2001 and the Corporations Amendment (Litigation Funding) Regulations 2020. The primary objective of the instrument is to extend the relief provided under the ASIC Corporations (Disclosure in Dollars) Instrument 2016/767 until it sunsets on 1 October 2026, thereby facilitating the effective operation of the regulatory framework. The instrument also ensures that the relief is consistent with the Regulation Impact Statement prepared by Treasury for the Litigation Funding Regulations, thus providing a clear pathway for potential legislative amendments by the Government and Parliament.

Scope and Application

The ASIC Corporations (Amendment) Instrument 2022/264, approved by the Australian Securities and Investments Commission (ASIC), serves to amend existing regulations concerning dollar disclosure provisions under the Corporations Act 2001. This instrument aims to extend the dollar disclosure relief for registered litigation funding schemes, ensuring these schemes can continue to operate without the burden of detailed dollar disclosure until the Dollar Disclosure Instrument expires on 1 October 2026. The legislation applies to entities involved in litigation funding, particularly those registered under the Corporations Act, and extends to the entire Commonwealth of Australia. The amendments made by this instrument do not introduce new exclusions or thresholds but rather refine and extend existing relief provisions. This instrument operates through subordinate legislative means, as authorised by various subsections of the Corporations Act, and is subject to disallowance. The consultation process involved feedback from industry participants and stakeholders, all of whom generally supported the need for relief. The instrument does not engage any applicable rights or freedoms, thereby being compatible with human rights as recognised in relevant international instruments.

Key Provisions

The ASIC Corporations (Amendment) Instrument 2022/264 amends the Corporations Act 2001 to continue the dollar disclosure relief for litigation funding schemes until the ASIC Corporations (Disclosure in Dollars) Instrument 2016/767 (Dollar Disclosure Instrument) sunsets on 1 October 2026. Specifically, the instrument repeals the commencement provision in paragraph 2(b) and Schedule 2 of the ASIC Corporations (Amendment) Instrument 2021/292, which originally introduced the dollar disclosure relief, and removes a note in section 8 of the Dollar Disclosure Instrument that no longer applies (Items 1 to 3). The dollar disclosure provisions in the Corporations Act 2001 (Act) require various costs, fees, charges, expenses, benefits and interests to be stated as amounts in dollar terms in Product Disclosure Statements and other types of documents (section 1). The Dollar Disclosure Instrument provides exemptions from these dollar disclosure provisions when ASIC considers that compliance would be impossible, unreasonably burdensome or not in the interests of clients (section 2). The 2021 Amending Instrument, which the current instrument amends, amended the Dollar Disclosure Instrument to provide dollar disclosure relief for litigation funding schemes (section 3). The instrument imposes obligations on financial product issuers and financial product advisers to ensure that Product Disclosure Statements for litigation funding schemes comply with the dollar disclosure relief, provided by the instrument and the Dollar Disclosure Instrument, until the relief sunsets on 1 October 2026. Issuers and advisers must ensure that they do not provide misleading or deceptive information regarding the costs and fees associated with litigation funding schemes. This includes ensuring that the relief applies correctly to the disclosure of litigation funding costs, fees, and other financial information in Product Disclosure Statements and other relevant documents. Breaches of the dollar disclosure relief provisions may result in civil or criminal penalties. Under the Corporations Act 2001, contraventions of the Act can lead to substantial fines for corporations and individuals, as well as potential imprisonment for individuals. The maximum penalty for a corporation under section 1317E of the Act is $21,000,000 or three times the benefit obtained, whichever is greater. For individuals, the maximum penalty is $2,100,000 or two years imprisonment, or both, under section 1317G of the Act. Additionally, ASIC has the authority to seek injunctions, compensation orders, and other remedies to enforce compliance with the Act and its instruments.