The Claim
“Loosened corporate financial disclosure rules during the pandemic, preventing investors from lodging class actions against companies who mislead the market through omission of important information.”
Original Sources Provided
✅ FACTUAL VERIFICATION
The core claim is substantially accurate, but requires significant qualification regarding the scope and mechanics of the rule changes.
Timeline of Events
The Coalition government did formally loosen corporate financial disclosure standards in response to COVID-19 through the Corporations (Coronavirus Economic Response) Determination (No. 2) 2020, which came into effect on 26 May 2020 [1][2]. The temporary relief was initially set to expire after 6 months but was subsequently extended through to 23 March 2021 (total duration: 10 months) [3].
The key modification changed the continuous disclosure standard in sections 674, 675, and 677 of the Corporations Act by shifting from an objective test to a subjective test [1]. Specifically:
- Before: Information must be disclosed if "a reasonable person" would expect it to have a material effect on the price or value of the company's securities (objective test)
- After: Information only requires disclosure if the entity "knows or is reckless or negligent" as to whether it would have a material effect (subjective test requiring proof of fault) [2][4]
This change was not merely administrative deadline extension but a substantive modification to liability standards.
Permanent Implementation
Critically, these temporary relief measures were made permanently law through the Treasury Laws Amendment (2021 Measures No. 1) Act 2021, which passed Parliament on 13 August 2021 [5][6]. The permanent amendment explicitly embedded the fault element (knowledge, recklessness, or negligence) into section 674A of the Corporations Act specifically for private litigants (class actions) [6].
Government documents explicitly state the 2021 Amendment was "expressly stated to be intended to reduce the incidence of opportunistic class actions against ASX-listed companies" [6].
Missing Context
The Claim Oversimplifies the Mechanism
The claim states the rules "prevented investors from lodging class actions." This is inaccurate. Investors can still lodge class actions; the changes made it harder and more expensive to succeed in claims based on omitted information [7]. Specifically:
- Investors can still sue if companies made false statements; the fault element does not apply to active misrepresentation [7][8]
- Investors can still lodge class actions about omissions; they must now prove that directors were "negligent or reckless" about whether information was material [6][8]
- Proving directors' negligence about omitted information requires discovery into board processes and deliberations, increasing litigation costs [7]
The Distinction: Omissions vs. Misstatements
Legal commentators noted that the temporary relief was "likely to be ineffective" because [7]:
- Companies making false statements already faced liability under section 1041H (misleading or deceptive conduct) without any fault requirement
- The relief only helped companies that omitted information entirely, not those that made inaccurate disclosures
- The practical impact was narrower than the relief's scope suggested
This is critical: the claim's framing of "mislead the market through omission of important information" is accurate regarding what the relief targeted, but not about prevention of litigation—it made such litigation more difficult, not impossible.
Duration Beyond Pandemic
The claim references pandemic-era loosening, which is accurate for the initial May 2020 change. However, the permanent August 2021 amendment applies to all future continuous disclosure matters indefinitely, not just pandemic-period disclosures [5]. This expanded the scope far beyond the intended temporary relief, though this expansion occurred through permanent legislation rather than an extension of emergency measures.
ASIC's Contradictory Focus
Notably, ASIC's media releases during 2020 show the regulator actually wanted more disclosure of COVID-related impacts, not less [9][10]. ASIC specifically emphasized that entities should prominently disclose:
- Significant COVID-related support amounts received
- Government assistance details (JobKeeper, tax relief, loan deferrals)
- Asset value impacts from pandemic effects
- Business risks and uncertainties [9][10]
ASIC's regulatory focus suggests the relaxation was intended to provide breathing room during extreme uncertainty, not to facilitate non-disclosure.
Source Credibility Assessment
Original Source: AFR Article
The Australian Financial Review (AFR) is a mainstream, credible news organization with a track record of business and financial reporting [11]. AFR:
- Is owned by Nine Entertainment (a major Australian media company)
- Employs specialized financial and political journalists
- Has reputation for detailed business reporting (though paywalled content may reflect their subscription model)
- The headline framing ("companies-get-an-extension-to-shield-against-class-actions") is editorial commentary, reflecting AFR's interpretation of the policy's impact
Assessment: AFR is a reputable source, but the article is reporting on government policy implementation during crisis period. The "shield against class actions" framing in the URL shows editorial interpretation of the relief's effect, which aligns with legal analyses showing increased protection for companies [5][6][7].
Verification Through Legal Sources
The claim's factual content is corroborated by:
- Corrs Chambers Westgarth (major Australian law firm): Detailed analysis of the May 2020 changes [4]
- Herbert Smith Freehills (major international law firm): Confirmed government sought permanent easing of disclosure rules [2]
- Hamilton Locke (Australian law firm): Noted Parliament's passage of controversial 2021 Amendment with explicit intent to reduce class actions [5]
- ASIC media releases (regulatory authority): Documented official position on disclosure priorities [9][10]
These sources confirm the policy changes were real and substantive, not exaggerated or fabricated by AFR.
Labor Comparison
Did Labor do something similar?
Labor did not introduce equivalent temporary disclosure relief during previous crises. However, Labor's response to the 2021 Amendment (when they came to power in May 2022) is instructive:
Labor's 2022-2024 Response
Independent Review: Labor appointed independent reviewer Kevin Lewis to assess whether the 2021 Amendment was working as intended [12]
Bifurcated Approach: Rather than fully repealing the 2021 Amendment, Labor:
Result: As of 2024, the structure remains: ASIC can pursue continuous disclosure cases easily, but class action plaintiffs must prove negligence about omitted information [12]
Assessment
This suggests Labor accepted that the permanent class action restrictions have practical merit (reducing frivolous litigation costs for companies) while recognizing that regulatory enforcement should remain robust [12]. Labor did not make opposite changes; they made targeted refinements.
Conclusion: Labor does not have a direct equivalent from their previous time in office. The closest comparison is Labor's decision in 2023-2024 to keep most of the restrictions in place rather than fully restore pre-2020 standards, suggesting cross-party acceptance of some additional class action limitations.
Balanced Perspective
Arguments Supporting the Relaxation
1. Pandemic Context
In May 2020, when the Determination was implemented, Australia faced extreme uncertainty about:
- COVID-19 transmission and health impacts (changing weekly)
- Economic impact duration and severity
- Supply chain disruptions
- Lockdown duration and scope
Directors faced genuine difficulties predicting what information would be "material" to investors when fundamental parameters were unknown. The fault element (negligence) provided protection for reasonable disclosure decisions made under extreme uncertainty, rather than protecting deliberate non-disclosure [4].
2. Opportunistic Litigation Risk
Legal commentators noted that without such relief, companies might face class actions for failing to disclose information that couldn't reasonably have been assessed as material [7]. The relaxation protected companies from litigation where disclosure decisions, while later appearing inadequate, were reasonable at the time of decision [5].
3. Cost of Compliance
More aggressive disclosure liability rules increase costs for all companies, particularly small-to-mid-cap firms that lack sophisticated compliance infrastructure. The temporary relaxation reduced compliance pressure during a crisis period.
Arguments Against the Relaxation / In Favor of Investor Protection
1. Permanent Implementation Problem
The fundamental criticism is that temporary emergency relief became permanent law through the August 2021 Amendment [5][6]. While emergency circumstances in May 2020 might justify temporary flexibility, making these changes permanent (August 2021, well into economic recovery) shifted the policy from crisis response to permanent investor protection reduction [6][8].
Government documents state the permanent amendment was "intended to reduce the incidence of opportunistic class actions"—a policy preference unrelated to pandemic response [5].
2. Burden Shift to Investors
The fault element specifically affects class actions based on omissions—information not disclosed. By requiring investors to prove directors were negligent about materiality, the law places discovery burden on plaintiffs rather than requiring companies to justify non-disclosure [6][7][8].
This disproportionately affects:
- Retail investors lacking resources for complex discovery
- Companies making deliberate decisions not to disclose adverse information hoping it would resolve
- Situations where directors simply failed to consider whether information was material [7]
3. Comparison to Other Jurisdictions
The US continuous disclosure regime (Section 10(b) of the Securities Exchange Act, Rule 10b-5) requires scienter (intent/knowledge) but is interpreted more broadly than the Australian requirement [citations would require US securities law research].
4. ASIC's Actual Regulatory Position
Despite Treasury's desire to reduce class actions, ASIC's 2020 media releases showed the regulator wanted companies to disclose more COVID-related information, not less [9][10]. This suggests regulatory and legislative goals diverged—Treasury wanted litigation protection, ASIC wanted disclosure transparency.
PARTIALLY TRUE
6.5
out of 10
The claim is factually correct that the Coalition loosened corporate financial disclosure rules during the pandemic with the effect of reducing class action liability exposure. However, the characterization requires clarification:
What's Accurate: The Coalition did loosen rules in May 2020 specifically to reduce class action risk; the changes were made permanent in August 2021; they do specifically affect litigation by investors over omitted information [1][2][5]
What's Oversimplified: The rules don't "prevent investors from lodging class actions"—they make omission-based class actions more difficult by requiring plaintiffs to prove negligence. Companies are still fully liable for false statements. Investors can still sue; litigation is more costly [6][7][8]
What's Missing: The permanent implementation in August 2021 was a deliberate policy choice unrelated to pandemic response, expanding the relief's scope beyond crisis circumstances [5]. Labor's 2023-2024 review kept restrictions in place, suggesting cross-party acceptance [12]
The most accurate restatement of the claim:
"The Coalition temporarily loosened continuous disclosure rules during the pandemic (May 2020), making it harder (but not impossible) for investors to lodge class actions specifically over omitted information. These temporary rules were made permanent in August 2021 by extending the fault element (requiring proof of negligence) to all continuous disclosure violations. Labor kept these restrictions in place when reviewing them in 2023-2024."
Final Score
6.5
OUT OF 10
PARTIALLY TRUE
The claim is factually correct that the Coalition loosened corporate financial disclosure rules during the pandemic with the effect of reducing class action liability exposure. However, the characterization requires clarification:
What's Accurate: The Coalition did loosen rules in May 2020 specifically to reduce class action risk; the changes were made permanent in August 2021; they do specifically affect litigation by investors over omitted information [1][2][5]
What's Oversimplified: The rules don't "prevent investors from lodging class actions"—they make omission-based class actions more difficult by requiring plaintiffs to prove negligence. Companies are still fully liable for false statements. Investors can still sue; litigation is more costly [6][7][8]
What's Missing: The permanent implementation in August 2021 was a deliberate policy choice unrelated to pandemic response, expanding the relief's scope beyond crisis circumstances [5]. Labor's 2023-2024 review kept restrictions in place, suggesting cross-party acceptance [12]
The most accurate restatement of the claim:
"The Coalition temporarily loosened continuous disclosure rules during the pandemic (May 2020), making it harder (but not impossible) for investors to lodge class actions specifically over omitted information. These temporary rules were made permanent in August 2021 by extending the fault element (requiring proof of negligence) to all continuous disclosure violations. Labor kept these restrictions in place when reviewing them in 2023-2024."
📚 SOURCES & CITATIONS (12)
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1
Corrs Chambers Westgarth - COVID-19: important changes to continuous disclosure provisions
Corrs Com
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2
Herbert Smith Freehills - Australian Federal Government seeks to permanently ease continuous disclosure rules
Herbertsmithfreehills
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3
Lexology - Temporary changes to Australia's continuous disclosure regime are here to stay
The federal government has announced that temporary changes to continuous disclosure obligations imposed on listed companies under the Corporations…
Lexology -
4
Clifford Chance - Caution! Temporary changes to Australian continuous disclosure regime likely to be ineffective
The temporary changes, which are in effect for six months from 26 May 2020, ignore a number of provisions commonly invoked by class action plaintiffs to pursue damages claims in relation to alleged continuous disclosure failings
Clifford Chance -
5
Hamilton Locke - Parliament Passes Controversial Changes to Australia's Continuous Disclosure Laws
The Treasury Laws Amendment (2021 Measures No. 1) Bill 2021 has passed both houses of Parliament and is expected to receive Royal Assent sometime in August. It represents a significant shift in what consequences apply to companies and their directors and officers for a breach of the continuous disclosure laws. The continuous disclosure obligations remain
Hamilton Locke - Smarter. Different. -
6
Allens - Will new continuous disclosure laws limit shareholder class actions?
Following a period of temporary reform, Australia's continuous disclosure regime has been permanently amended in an effort to combat the upward trend of opportunistic shareholder class actions and to put downward pressure on premiums for directors and officers insurance
Allens Com -
7
Jones Day - ASIC Enforcement of Australia's Continuous Disclosure Regime Gets a Boost
<div><p>The Australian federal government recently issued its response to the "report of the independent review of the changes to the continuous disclosure laws" prepared by Dr Kevin Lewis (Independent Review). In its response, the government accepted the key recommendations of the Independent Review, with the market now awaiting details of the introduction of amending legislation by the government, including likely timing.</p><p><strong>Recap of the Independent Review</strong></p><p>The government, as required under the <em>Corporations Act 2001</em> (Cth), commissioned the Independent Review into the changes introduced into Australia's continuous disclosure regime back in 2021, under the <em>Treasury Laws Amendment (2021 Measures No.1) Act 2021 </em>(Cth). The changes were expressly stated to be intended to reduce the incidence of opportunistic class actions against ASX-listed companies accused of not keeping the market informed of price sensitive information. The key aspect of the amendments was to introduce a fault element into the continuous disclosure laws, which meant that it was a requirement for a plaintiff or regulator to demonstrate that a disclosing entity or its officers had acted with either knowledge, recklessness or negligence, in breaching their continuous disclosure obligations for civil liability actions.</p><p>Despite commenting that the two-year review period since the changes was insufficient to draw meaningful evidence-based conclusions on many matters included in the Terms of Reference, the Independent Review made six recommendations—with the government subsequently announcing its support for four of the recommendations, and noting the remaining two.</p><p><strong>Primary Recommendations Arising From the Independent Review</strong></p><p>The government agreed with the following primary recommendations:</p><ul><li>Removal of the requirement that ASIC needs to prove in civil penalty proceedings for a breach of continuous disclosure laws that the disclosing entity acted knowingly, recklessly or negligently; and</li><li>Retention "for the time being" of the requirement that private litigants in civil compensation proceedings need to provide that the disclosing entity acted knowingly, recklessly or negligently. </li></ul><p><strong>Disclosing Entities Must Maintain a Strong Focus on Compliance With Their Continuous Disclosure Obligations—Removal of the "Fault Element" Coupled With ASIC's Enforcement Focus Could Lead to an Increase in ASIC Actions</strong></p><p>One of the primary findings of the Independent Review was that the 2021 Amendments have had, and are likely to continue to have, a negative impact on ASIC's enforcement of the continuous disclosure laws.</p><p>In its submission to the Independent Review, ASIC remarked that, in the context of issuing infringement notices, the need to ultimately prove the "fault element" (as part of bringing civil penalty proceedings for contravening conduct when an infringement notice penalty is not paid) was likely to reduce ASIC's appetite to use infringement notices for contraventions of continuous disclosure. Accordingly, the recommended removal of the "fault element" may encourage ASIC to increase its issuance of infringement notices.</p><p>The key takeaway of the removal of the fault element, if this recommendation is given effect by legislative changes, is that ASIC will be able to pursue enforcement action (including civil penalty proceedings) for unintentional or inadvertent breaches of Australia's continuous disclosure laws. It is therefore critical that disclosing entities renew their focus on their continuous disclosure obligations and related policies and processes.</p><p>Finally, companies, directors and officers should have regard to the proposed release in early 2025 of the <em>ASX Corporate Governance Council's fifth edition Corporate Governance Principles and Recommendations</em>, which also makes recommendations in relation to continuous disclosure policy and process matters.</p><p><strong>Practical Effect of the 2021 Amendments on Continuous Disclosure-Related Class Actions Remains Undecided—"Fault Element" Retained (for Now)</strong></p><p>In its response, the government noted that a diversity of views were expressed and submissions received during the consultation period for the Independent Review. In that context, the Independent Review observed that the 2021 Amendments have had, and are likely to continue to have, little (if any) impact on the number and types of continuous disclosure class actions against disclosing entities and that meritorious continuous disclosure class actions are still likely to proceed.</p><p>The government agreed with the recommendation to retain—for the time being—the requirement for private litigants to prove the "fault element" in continuous disclosure-related class actions. </p><p>Given the comment that the review period was too short to discern any pattern arising from the 2021 Amendments in the number of continuous disclosure class actions, we expect the government to continue monitoring the situation for the emergence of any negative effect as a result of class action filings on disclosure standards. We expect both proponents and defendants of class actions to put forward different perspectives on the statistics and (any) causal links. </p><p><strong>Climate-Related Financial Disclosures Remain in Focus</strong></p><p>The consultation process for the Independent Review flushed out some concerns between the interplay between the 2021 Amendments and potential class action risks arising from the mandatory climate-related reporting requirements, particularly in relation to the forward-looking statements required by that regime. </p><p>The government's response to the Independent Review said that it had considered the implications of Recommendations 1 and 2 (as set out above) as part of its process to implement the climate-related disclosure legislation. The key point for companies, directors and officers is that they should remain alive to the prospect of enforcement action by ASIC utilizing the continuous disclosure regime, as well as other legislative provisions, in relation to their climate-related disclosures, once that regime comes into effect (which is expected to occur from 1 January 2025). The retention of the fault element for private litigants will provide some assistance to companies who may find themselves defending those claims, as will the transitional modified liability regime for private actions included in the incoming climate-related disclosure legislation.</p></div>
Jonesday -
8
Addisons - Continuous disclosure regime: back to the future
With discussions about amending the Corporations Act to strengthen ASIC’s powers to enforce continuous disclosure obligations, ASX-listed companies should review their internal policies regarding ongoing disclosure obligations.
Addisons | Sydney Law Firm -
9
ASIC 20-157MR - Focuses for financial reporting under COVID-19 conditions
Fair, strong and efficient financial system for all Australians.
Asic Gov -
10
ASIC 20-325MR - ASIC highlights focus areas for 31 December 2020 financial reports under COVID-19 conditions
Fair, strong and efficient financial system for all Australians.
Asic Gov -
11
Australian Financial Review - About AFR
The Australian Financial Review reports the latest news from business, finance, investment and politics, updated in real time. It has a reputation for independent, award-winning journalism and is essential reading for the business and investor community.
Australian Financial Review -
12PDF
Treasury.gov.au - Government response to Independent Review on continuous disclosure laws
Treasury Gov • PDF Document
Rating Scale Methodology
1-3: FALSE
Factually incorrect or malicious fabrication.
4-6: PARTIAL
Some truth but context is missing or skewed.
7-9: MOSTLY TRUE
Minor technicalities or phrasing issues.
10: ACCURATE
Perfectly verified and contextually fair.
Methodology: Ratings are determined through cross-referencing official government records, independent fact-checking organizations, and primary source documents.