Portfolio

Litigation Capital prepared for new Australian regulations

By Josh White

Date: Tuesday 26 May 2020

Litigation Capital prepared for new Australian regulations

(Sharecast News) - Dispute financing company Litigation Capital Management responded to an announcement from Australia's federal treasurer Josh Frydenberg on Tuesday, that litigation funders operating in the country would be subject to new regulation requiring them to obtain and maintain an Australian Financial Services License (AFSL).
The AIM-traded firm said it believed it was the only litigation financier in Australia that currently held and maintained an AFSL.

Currently, the supply of litigation finance was exempt from the requirement to hold such a license, but that exemption was likely to be removed by August.

The board said that placed the company in "an advantageous position" against its peers operating in the country.

As part of the new regulatory process, Litigation Capital said it had been asked by the Australian federal government to assist in a parliamentary inquiry into whether any further regulation of litigation finance was required in the context of class actions, the findings and recommendations of which would be made public.

The firm said it had expected "for some time" that class actions in Australia would be the subject of further regulation, and thus had expressed its support for such an initiative while assisting in two prior inquiries - one by the Australian federal government and one by a state government.

Litigation Capital said it was "actively managing" its portfolio, with the aim of spreading its investment risk to ensure that no industry sector or type of claim was dominating.

Specifically, it said it was limiting the number of class actions that it was prepared to invest in depending on the size of its overall portfolio.

The company said it was "firmly focussed" on the provision of disputes financing in the areas of insolvency, commercial disputes, arbitral disputes and corporate portfolio funding.

"Litigation Capital Management anticipated changes to regulation and as a result already holds an Australian Financial Services License," said chief executive officer Patrick Moloney.

"[The company] fully supports the move to increase regulation in our industry.

"Regulation of litigation funding insofar as it concerns class actions is something that is not only welcomed by Litigation Capital Management, but could provide it with a strategic advantage as the cost and compliance issues is likely to create further barriers to entry and restrict the numbers of financiers that can fund class actions."

At 1222 BST, shares in Litigation Capital Management were up 9.07% at 65.44p.

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