From 22 August, the law now requires any class action which is being supported by litigation funding to be registered as a managed investment scheme (MIS).

After revealing it was not consulted on the decision, the Australian Securities and Investments Commission (ASIC) has now been instructed by Treasury to refuse to hand over key documentation, between it and Josh Frydenberg’s office, to a parliamentary committee. 

According to the Keep Corporations Honest campaign, ASIC’s scrambling follows revelations the Treasurer did not prepare a Regulation Impact Statement (RIS) for the Office of Best Practice Regulation (OBPR) as is required for any measure likely to have major impacts on businesses and individuals. The OPBR has since assessed the RIS process as insufficient.

Spokesperson for Keep Corporations Honest Ben Hardwick said the Senate would likely view the Morrison government’s motives for introducing the new regulation with suspicion. 

“No one – including ASIC – expected Josh Frydenberg to announce, in the middle of the [COVID] crisis, that class actions would now be regulated as management investment schemes,” he said.

“Through his surprise announcement, Mr Frydenberg has plunged Australian access to class actions into chaos. As ASIC would be aware, class action group members have rights under the legal system that conflict with the rights of investors in a managed investment scheme.” 

Mr Hardwick said that class action victims are not investors, “their injuries are not assets” and that it would make zero sense to any policymaker operating in good faith to regulate class actions as investment schemes. 

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“Class actions are rightly overseen by courts, not ASIC,” he said.

"If you try to regulate an entity as if it were something else, chaos will ensue. ASIC will now be inundated with requests to undertake the confusing task of reviewing many class actions as managed investment schemes. This will slow the wheels of justice to a virtual halt.

“In effect, this law change will make it much harder for ordinary people to get access to the funding they need for a class action if they’ve been hurt, injured, or ripped off by a corporation or government.

“You would hope this was not a foreseen outcome, but it’s hard to come up with an alternate explanation.”

The Senate call comes after lawyers and backers of class action lawsuits have secured support from the Labor Party to attempt to overturn changes to litigation funding.

Labor said they will move to disallow the Morrison government’s farcical efforts to impose unfit “managed investment scheme” regulation on Australian class actions.

Shadow attorney-general Mark Dreyfus said the regulations treated plaintiffs in class actions as if they were investors in managed investment schemes.

“Labor will stand up for the rights of ordinary Australians seeking access to justice by moving to disallow the Morrison government’s attempt to cripple class actions by regulation,” Mr Dreyfus said.

“Litigation funding and class actions provide a vital path to justice for Australians trying to uphold their rights against wealthy defendants with vastly greater resources.”