I missed reading Brian Gaynor’s Saturday column in the NZ Herald for some reason, but caught up with it this morning.
Litigation funding could be used in a large number of situations including receiverships, breaches of continuous disclosure rules, insider trading, inaccurate prospectuses and valuations, related party transactions, breaches of directors’ duties and breaches of care by financial advisers.
There are a number of recent circumstances, including Hanover, Bridgecorp, Blue Chip, the ING income funds, Vestar, Feltex and Tranz Rail, where litigation funding would have been welcomed by investors.
Given the circumstances affecting many of the aggrieved investors and what appears on occasion to be the reluctance of regulatory authorities to take action I am inclined on balance to think that such a development is not a bad thing.
It as well to remember though that litigation funders are not in this for their health or as charities. It is a business and they will assess the risk and probabilities of success very carefully.
Having said that the likelihood is that in some respects governance may well be improved through the arrival of this mechanism. If that happens then collectively we all benefit.
The whole of Gaynor’s article is well worth reading.
UPDATE #1:– Bernard Hickey includes the Gaynor column in his Top 10 at 10 piece. There are some other useful stories there as well. Hickey does not see Litigation Funding as a silver bullet either.