The Association of Litigation Funders of Australia (ALFA) has described as “legislative assault” the plans by the Federal Government to permanently ease the disclosure rules for listed companies.

It says the proposed changes, such as holding companies and directors liable for civil penalty proceedings only when they have acted with “knowledge, recklessness or negligence” were a win for corporate lobbyists at the expense of millions of shareholders.

Temporary changes made in May last year to continuous disclosure rules were to expire this month but the Federal Government announced last month it wants to the amendments to become permanent.

The insurance and broking sectors have welcomed the announcement, saying it will provide some relief for directors’ and officers’ (D&O) premiums, which have risen so sharply that many are struggling to afford adequate cover. D&O providers have also scaled back offerings because of what they say is a very litigious environment in Australia.

But ALFA strongly disagrees. It says the proposed amendments to the Corporations Act remove strict liability. It also similarly weakens prohibitions against related misleading or deceptive conduct under the Corporations Act and the Australian Securities and Investments Commission (ASIC) Act.

“The protections that investors enjoy make our market one of the most highly regarded for integrity in the world,” ALFA Chairman John Walker said.

“ASIC has said our existing regime, the result of years of refinement, works well and has contributed directly to making Australia an attractive investment destination globally.

“Why would the Government want to weaken these world-leading investor protections? The answer can only be to appease lobbyists for company directors who fear being legally accountable to shareholders.”

Treasurer Josh Frydenberg says the changes will strike the right balance between ensuring shareholders and the market are appropriately informed while also allowing companies to more confidently make forecasts of future earnings or provide guidance updates without facing the undue risk of class actions.

According to Treasury, there has been an increase in the number of material announcements to the market, relative to the same period last year since the “fault” element was introduced temporarily last year. Under the proposed changes, companies and their officers are not liable for misleading and deceptive conduct in circumstances where the continuous disclosure obligations have been contravened unless the requisite “fault” element is also proven.

ALFA says the proposals would make it harder for investors to bring claims against listed company directors for financial loss following non-disclosure of market-sensitive information, market abuses such as insider trading or related misleading and deceptive conduct.

“The problem is not shareholder class actions but the increase in corporate misconduct,” Mr Walker said. “Yet the Government’s solution is to make it harder for shareholders to seek redress.”