Will lawyers find themselves in the same regulatory boat as advisers?
The Australian Securities and Investments Commission (ASIC) has signalled that lawyers involved in future class action arrangements may find themselves subject to many of the same rules and obligations as financial planners.
In a submission filed with the Joint Parliamentary Committee on Corporations and Financial Services inquiry into litigation funding and the class action industry, ASIC said that lawyers were likely to find themselves in the realm of providing financial product advice if they were “distributing” litigation fund arrangements.
The ASIC submission has looked at the implications of litigation funders being required to hold an Australian financial services (AFS) license and for class action schemes to be regarded as a Managed Investment Scheme (MIS).
“The advice regime may apply to those ‘distributing’ the litigation fund arrangements, such as lawyers, if they provide advice in relation to the registered scheme,” the submission said.
“A person must hold an AFS licence to provide financial product advice in relation to a registered scheme. Financial product advice is a recommendation or a statement of opinion, or a report of either of those things, that is intended to, or can reasonably be regarded as being intended to, influence a client in making a decision about a particular financial product or class of financial product (or an interest in either of these)”.
The submission said that “financial product advice will generally involve a qualitative judgement, evaluation, assessment or comparison of the features of one or more financial product(s)”.
The submission noted that lawyers might be able to avoid being caught in the advice regime if their advice was deemed to be about matters of law and legal interpretation and the provision of legal services in the ordinary course of their activities.
However it said that if financial services in relation to litigation funding schemes were no longer an exempt financial service, “the role of a lawyer (e.g. advising clients about participation in a specific litigation funding scheme or comparing different schemes) is an issue that requires further consideration having regard to the obligations that lawyers have relating to conflicts of interest (e.g. lawyers are subject to ethical duties to the court, statutory duties under state or territory legal profession Acts, and professional codes of conduct and practice rules)”.
“Lawyers are also subject to fiduciary duties to their clients,” it said.
Recommended for you
Fund managers may be operating in a squeezed environment, but a salary guide shows they are willing to pay up for specialist talent to diversify their fund range.
Reach Alternative Investments has entered into a strategic partnership with Russell Investments to bolster its wholesale private markets offering for financial advisers and investors.
Boutique investment consulting and research house Genium Investment Partners has announced a senior appointment to drive further growth in its research ratings business.
Nuveen has appointed a global head of estate, a successor to Chris McGibbon who steps down after almost 25 years.
