Home / Regulatory & Government / Rule change to avert ‘opportunistic’ class actions extended
28 September 2020
Temporary rule changes to prevent opportunistic class actions over stock exchange disclosures during the coronavirus pandemic have been extended by six months.
The changes introduced in March mean companies and officers are only liable for a breach if there has been “knowledge, recklessness or negligence” around price sensitive updates.
Treasurer Josh Frydenberg says evidence to date shows the move has assisted listed companies to continue to update the market during the current difficult and uncertain time.
“Given the impact of COVID-19 and the uncertainty it generates, it remains considerably more challenging for companies to release reliable forward-looking guidance to the market,” Mr Frydenberg said.
Without the change, companies may have been encouraged to hold back from providing information due to concerns they would be hit by securities class actions if information was later found to be incorrect.
Increased securities class action activity supported by litigation funding has been blamed for a surge in directors’ and officers’ premiums and reduced insurance capacity in the market.
The temporary disclosure rule changes will continue until March 23.