The corporate regulator has dismissed “anonymous and anecdotal” stories of companies considering moving offshore because of the rising cost of directors’ and officers’ insurance, saying class action lawsuits blamed for the situation are “critical to protecting shareholders and promoting market integrity”.

In a submission to the Australian Law Reform Commission (ALRC) discussion paper on class actions and third party litigation funders and the call for a review of the continuous disclosure obligations and misleading or deceptive conduct provisions within the Corporations Act, the Australian Securities and Investments Commission (ASIC) says it sees no need for such a review.

“We do not consider anonymous and anecdotal suggestions from companies considering moving offshore as sufficient evidence to reconsider continuous disclosure and misleading or deceptive conduct regimes.”

It says that the laws are critical to protecting shareholders and promoting market integrity, and “the economic significance of fair and efficient capital markets dwarfs any exposure to class action damages”.

ASIC also criticises the Productivity Commission’s recommendation that funders should by licensed to ensure they hold enough capital to meet their financial obligations.

This would not address the risk that funders couldn’t meet their liabilities, ASIC says.

“The Australian Financial Services licensing regime is focused on the conduct of financial services, and litigation funders do not sit neatly within the regime.

“AFSL requirements are not focused on ensuring that licensees meet their financial obligations to clients, and they are not intended to address the risk of an adverse costs order in court.”

ASIC believes litigation funders should be regulated as a legal service, consistent with other jurisdictions.

The regulator is also critical of the ALRC’s comment in the discussion paper that Australia’s disclosure obligations have “peculiar characteristics”, which suggest that the regime compares unfavourably to other comparable ones overseas.

Independent international research consistently ranks Australia’s “market cleanliness” favourably compared to others, ASIC says.

“The continuous disclosure obligations are there because not every company will have the incentive to voluntarily disclose price sensitive information, especially with regards to information that may negatively impact on the company’s share price.”

ASIC hasn’t seen any evidence that directors are being inappropriately held to account in class actions, the submission says.

An increase in the frequency of class actions doesn’t in and of itself indicate a problem with the regime, and there are many factors that may drive an increase, including misconduct, the regulator says.

“The fact that a case settles before the final court hearing does not suggest that the claim is without merit or that there are problems with existing law.

“Any call for a review should demonstrate that there are significant deficiencies with the regime that require scrutiny by government,” ASIC says.

“Any adjustment of these regulations would need to consider the broader impact of our overall regulatory architecture.”