The Federal Government will look at returns class action members receive and greater oversight of the sector as part of a consultation on reforms recommended by a Parliamentary Committee inquiry.

The Government has already made changes to stock exchange continuous disclosure rules, one of the inquiry’s 31 recommendations, and says it is now looking at the other proposals.

Treasurer Josh Frydenberg and Attorney-General Michaelia Cash say the report highlights the growth of litigation funding, the participation of international players and the frequency of abnormally high profits for class action law firms and funders.

“The committee found that current regulatory arrangements are inadequate and greater oversight of the industry is required in order to ensure fair and reasonable outcomes for all class members,” a statement released today says.

Proposals included the introduction of a guaranteed minimum rate of return for class action members.

“This measure is of particular importance to ensure successful applicants are adequately compensated in their cases as well as preventing litigation funders and law firms from taking disproportionate fees in the process,” the Government says.

The Parliamentary Joint Committee on Corporations and Financial Services handed down its report on litigation funding and the regulation of the class action industry on December 21.

Insurers appearing before the committee last year highlighted that directors’ and officers’ (D&O) cover was becoming increasingly unaffordable as a result of class action pressures, particularly related to listed companies.

The final report says Australia’s “unique and favourably regulated” litigation funding market has become a global hotspot for international investors, including many based in tax havens and with “dubious” corporate histories.

“While no witness in the inquiry proposed Australia abolish class actions or litigation funding, there was virtually unanimous agreement the current regulatory arrangements are too light touch and greater oversight of the industry is required,” the report says.

“The only debate was about the extent and nature of that regulation.”

Report recommendations also relate to competing class actions, consistency across jurisdictions and issues around costs and fees.