Corporations Regulations 2001

CHAPTER 7 - FINANCIAL SERVICES AND MARKETS  

PART 7.6 - LICENSING OF PROVIDERS OF FINANCIAL SERVICES  

REGULATION 7.6.01AB   OBLIGATION ON PERSONS PROVIDING EXEMPT FINANCIAL SERVICE  

7.6.01AB(1)    

For paragraph 926B(1)(c) of the Act, Part 7.6 of the Act applies as if section 911A of the Act were modified to insert the following subsection after subsection (5B) :

" (5C)
If the regulations prescribe an exemption under paragraph (2)(k) that covers the provision of a service by a person in relation to:

(a) a litigation funding scheme mentioned in regulation 5C.11.01 of the Corporations Regulations 2001 ; or

(b) a litigation funding arrangement mentioned in that regulation;

the regulations may require the person to have adequate practices, and follow certain procedures, for managing conflicts of interest in relation to the scheme or arrangement. "

7.6.01AB(2)    

For subsection 911A(5C) of the Act, if a person is providing, or has provided, a financial service covered by the exemption mentioned in paragraph 7.6.01(1)(x) or (y) , the person must:

(a)    

maintain, for the duration of the litigation funding scheme or litigation funding arrangement, adequate practices for:

(i) managing any conflict of interest that may arise in relation to activities undertaken by the person, or an agent of the person, in relation to the scheme or arrangement; and

(ii) ensuring that a lawyer providing services in relation to the scheme or arrangement, and any immediate family member of such a lawyer, do not have or obtain a direct or indirect material financial interest in the person; and

(b)    follow the written procedures mentioned in subregulation (4) for the duration of the scheme or arrangement.

Note: The exemption mentioned in paragraph 7.6.01(1)(x) relates to a litigation funding scheme mentioned in regulation 5C.11.01 . The exemption mentioned in paragraph 7.6.01(1)(y) relates to a litigation funding arrangement mentioned in that regulation.

7.6.01AB(3)    
A person commits an offence if the person contravenes subregulation (2).

Penalty:

(a) for an individual - 50 penalty units; and

(b) for a body corporate - 500 penalty units.

7.6.01AB(4)    
For subregulation (2) , a person has adequate practices for managing a conflict of interest that may arise if the person can show through documentation that:

(a)    the person has conducted a review of the person ' s business operations that relate to the scheme or arrangement to identify and assess potential conflicting interests; and

(b)    the person:

(i) has written procedures for identifying and managing conflicts of interest; and

(ii) has implemented the procedures; and

(c)    the written procedures are reviewed at intervals no greater than 12 months; and

(d)    the written procedures include procedures about the following:

(i) monitoring the person ' s operations to identify potential conflicting interests;

(ii) how to disclose conflicts of interest to general members and prospective general members;

(iii) managing situations in which interests may conflict;

(iv) protecting the interests of general members and prospective general members;

(v) how to deal with situations in which a lawyer acts for both the funder and general members;

(vi) how to deal with a situation in which there is a pre-existing relationship between any of a funder, a lawyer and a general member;

(vii) reviewing the terms of a funding agreement to ensure the terms are consistent with Division 2 of Part 2 of the Australian Securities and Investments Commission Act 2001 ;

(viii) recruiting prospective general members; and

(e)    the terms of the funding agreement are reviewed to ensure the terms are consistent with Division 2 of Part 2 of the Australian Securities and Investments Commission Act 2001 ; and

(f)    the matters mentioned in paragraphs (a) to (e) are implemented, monitored and managed by:

(i) if the person is an entity other than an individual - the senior management or partners of the person; or

(ii) if the person is an individual that represents an entity - the senior management or partners of the entity.