Federal Parliament has passed legislation that will make temporary changes to stock exchange continuous disclosure rules permanent, reducing the risk of opportunistic class actions.

The changes were introduced in May last year as part of measures to assist companies amid the uncertainty of the COVID-19 pandemic. But the Government said in February it would submit a bill to make them permanent, in a move welcomed by insurers and brokers.

The legislation passed last week amends the Corporations Act so companies and their officers are only liable for civil proceedings on disclosures where they have acted with “knowledge, recklessness or negligence”.

Treasurer Josh Frydenberg says introducing a fault element will more closely align Australia’s continuous disclosure regime with that of the US and the UK.

“The changes 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,” he says.

A high number of class actions triggered by disclosure laws has been blamed for soaring directors’ and officers’ premiums in recent years for listed company cover.

Moray & Agnew Partner Michael Polorotoff says the permanent change should raise the bar when it comes to plaintiffs and litigation funders bringing and pursuing future securities class actions.

“While the permanent reforms are overwhelmingly positive for the insurance market, it remains to be seen how plaintiffs and litigation funders respond and formulate future securities class actions with a view to circumventing the operation of those reforms,” he said.