Treasurer Josh Frydenberg is tightening the screws on litigation funders by imposing new regulations.

Funders will now need to hold an Australian financial services licence, exposing them to stricter transparency and accountability measures.

Mr Frydenberg is concerned the number of class actions has tripled over recent years.

"It is now even more important that litigation funding activities are regulated in a manner that is consistent with other financial services and products that seek to provide investment returns to consumers," he told AAP on Friday.

"There is no reasonable basis for litigation funders to continue to be exempt from the same regulation that applies to the entities which they seek to litigate against."

The Australian Institute of Company Directors welcomed the regulatory squeeze, arguing the rules would help guard against "opportunistic" class actions.

"This government step comes at a time when business leaders are working hard to save jobs and companies from collapse," chief executive Angus Armour said.

"They do not need to be looking over their shoulders for lawyers and funders looking to capitalise on the uncertainty created by the pandemic."

Soon after the crackdown was flagged, Slater and Gordon announced it had reached a $95 million settlement in a class action on behalf of aggrieved Spotless Group shareholders.

The class action alleged Spotless Group misled the market through announcements made in late 2015.

The case was co-funded by three litigation funders.

The coalition last week launched a parliamentary inquiry into class actions, believing greedy financiers are hogging the settlements, leaving applicants to fight over the scraps.

Shadow attorney-general Mark Dreyfus has described the inquiry as a shameless attempt to protect the government's big business mates.

Australian Associated Press