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A small boutique firm specialising in Property, Business Law and Thoroughbreds

tony fleiter and Robert angyal-350Macquarie Legal Practice is a boutique sized law firm which acts for private individuals, families and small to medium enterprises. Our Principal and staff have expertise, energy, are focused and reliable and are committed to serving the needs of our clients on a cost effective basis. "Liability limited by a scheme approved under Professional Standards Legistalion"

This is an entertaining examination of proof of title of thoroughbred horses by two of the country’s leading lawyers on the subject.


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Tony has recently published two thoroughbred industry documents. One on stallion syndication and one on syndicating racehorses


The Regulatory Regime governing the syndication of thoroughbred horses for racing purposes

logoThe syndication of thoroughbred horses for racing purposes is subject to regulation under the Corporations Act and the Australian Rules of Racing



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During 30 years of legal practice in the thoroughbred industry I have heard the following words, or similar, many times from aggrieved buyers of racehorses, or shares in racehorses, seeking advice as to their legal rights to rescind the bargain and seek restitution:

  •  “There is nothing in writing!”
  •  “I contacted the seller after seeing an advertisement!”
  •  “I visited the stable and looked at the horse!”
  •  “He said he bought the horse at the sales on “spec” because he really liked it as a type and it had a good pedigree!”
  •  “He said the horse had vetted 100% sound!”
  •  “He said he would aim the horse at the rich 2YO races!”
  •  “He said he would look after everything and that I would receive a monthly invoice for my share of expenses!”
  •  “We simply agreed it was a deal, shook hands and I gave him a cheque!”
  •  “He seemed like a nice guy and I trusted him!”
  •  “The monthly expenses are a lot more than he said they would be!”
  •  “The horse is a dud!”
  •  “The bastard has conned me and ripped me off!”
  •  “He has done the wrong thing!”
  •  “Can I get out of it without it costing me any more money?”
  •  “Can I get my money back?”


There are many industry partisans who advocate that the sale and purchase of thoroughbred racehorses, including fractional interests or shares, should not be subject to regulation, because investment in thoroughbred horses is highly speculative and nothing more than a game of chance. When doing so, they ignore, either through ignorance or for convenience, the fact that such transactions and ownership arrangements are subject to numerous laws (both federal and state) which can potentially impact the rights and obligations of the parties, including the Sale of Goods Act, Partnership Act, Conveyancing Act, Australian Consumer Law, Corporations Act and the Personal Property Securities Act, etc., some of which have consumer protection provisions embedded within them. The sense of bravado and enthusiasm that often engulfs the parties and, other than at public auction, results in the bargain being consummated with a handshake after only a brief discussion (an effective professional sales pitch), instead of a written agreement being signed by the parties after appropriate disclosure, due diligence and agreement as to terms, rapidly fades when problems arise and cause one or other of the parties, usually the buyer, to review the bargain and consider their legal rights and remedies. Only then do they lament the fact that the transaction was not the subject of appropriate documentation and a signed agreement.

This paper is about the syndication of thoroughbred racehorses and the regulatory regime designed to promote and protect market integrity.



This paper is intended to provide an in-depth analysis of the statutory provisions, regulations and rules that form the basis of the regulatory regime governing the syndication of thoroughbred horses for racing purposes and the subsequent operation of those syndicates.

Persons who engage in this activity as promoter or seller typically acquire horses either at public auction or by private treaty with the intention of reselling them by offering fractional ownership interests (shares). They commonly advertise on websites, TV, and in various newspapers and industry journals, asserting:

  •  the superior quality of the horses and their prospects of winning races (prize money);
  •  that the price of the shares represents value for money;
  •  that the promoter has skill, expertise and a track record of selecting and syndicating horses that have progressed to winning races; and
  •  that the nominated trainer is a successful trainer of winners.

Some promoters have an exclusive arrangement with a particular trainer, while others place their horses with different trainers. A significant number of trainers also act as promoters in their own right.

Why the need for regulation?

Promoters predominantly target members of the public who have little, if any, prior ownership experience. Their lack of product knowledge and varying motivations to invest adds to investment risk and highlights the necessity for an appropriate disclosure regime. Market integrity is also important for promoting the depth of market necessary to attract investors.


The regulatory regime governing this activity is founded upon the provisions of the Corporations Act 2001 (“the Act”) relating to managed investment schemes and involves interaction between the Australian Securities & Investments Commission (“ASIC”) and the Principal Racing Authorities of the various states and territories, as Lead regulators.

What is a managed investment scheme (MIS)?

The general public tends to associate the phrase “managed investment scheme” and its prefix “MIS” with investment schemes that are designed to invest in securities and other traditional investments; however, the definition ascribed by the Act is deliberately wide and designed to catch virtually all arrangements targeting collective investment and would, by itself, catch virtually all business models and structures.

The provisions of the Act which govern the requirements of ASIC to carry out activities concerning such schemes, and the restrictions on promoting them, have broad application and have been held to cover such diverse activities as film, agriculture, mortgage funds, property development, sports betting, thoroughbred horse breeding and racing, etc. These types of MISs’ can be distinguished from the limited asset classes that have been exempted from the regime because they are considered to be “non-speculative” and for “personal use”, such as time share resorts, luxury car and boating clubs.

Under the Act, any person who is “carrying on a financial services business” [“dealing is a financial product” (which includes the “issuing”, “underwriting” and “disposing” of interests in any managed investment product), or “operating a registered scheme”], must be licensed, and that the scheme(s) must be registered, subject to specific statutory exemption or Class Order relief.

A distinction is made between “retail clients” and “wholesale clients”. Generally, the consumer protection provisions will only apply to “retail clients”, as it is recognized that “wholesale clients” (including professional and sophisticated investors) do not require the same level of protection, as they are better informed and better able to assess the risks involved in financial transactions. A financial product is provided to a person as a “retail client” if it is not provided to the person as a “wholesale client”. To be treated as a “wholesale client”, the investor must satisfy a wealth, occupation or other threshold test.

The advertising or public promotion of “financial products” (that are managed investment products) is permitted only in relation to those offers of interests that require a Product Disclosure Statement (“PDS”) and a PDS is available, or where participation is available only to “wholesale clients”.

What ownership arrangements are excluded from the regulatory regime?

Joint ownership arrangements of thoroughbred racehorses established by friends, relatives etc. [non-commercial social groupings] are considered to be “private” arrangements and are not subject to regulation under the Act.

Who does the regulatory regime apply to?

The regulatory regime applies to any person who is dealing in shares in thoroughbred horses for racing purposes (each a Horse racing syndicate), as virtually all joint ownership arrangements, typically partnership, co-ownership or unit trust arrangements, satisfy the definition of MIS ascribed by the Act and are subject to regulation.

Furthermore, all joint ownership arrangements that comply with the Australian Rules of Racing (“the ARR”) satisfy the definition of MIS.

What is ASIC’s approach to regulation?

ASIC has set out its approach to the regulation of horse breeding and horse racing schemes in Regulatory Guide 91 [issued in 2012, replacing RG91 issued in 2007] (“RG91 [2012]”). If you have not already read RG91 [2012], it would be advantageous for you to do so before proceeding to read this paper.

While ASIC has responsibility for administering the Act, it has elected to exercise its discretionary powers and granted conditional relief for small scale schemes from the specific provisions of the Act relating to scheme registration, in the form of Class Order 02/319 – Horse racing syndicates [issued by ASIC on 14/02/2002] (“the Class Order”). ASIC has appointed the Principal Racing Authorities of the various states and territories as Lead regulators to administer the terms of the Class Order within their respective jurisdictions.

The effect of the Class Order is to relieve those schemes that comply with the terms of the Class Order from otherwise having to comply with the provisions of the Act, which require that they be registered as MISs’.

The scope of the relief is limited to the terms of the Class Order.

What are the basic requirements of the regulatory regime?

While the statutory provisions and regulations are complex, the basic requirements of the regulatory regime, and how it operates, is simply explained as follows:

1. The rules (specifying expected behaviors and outcomes)

Requirement for promoters and managers to be licensed

A person who establishes a Horse racing syndicate that is a “private” syndicate [non-commercial social grouping] is not required to be licensed.

Any person (promoter) who is [carrying on a financial services business] dealing in shares in Horse racing syndicates, must hold an appropriate AFSL authorizing the licensee to provide the services, regardless of whether or not a particular syndicate is required to be “registered”. There is no statutory exemption or Class Order relief from this requirement.

The manager of a Horse racing syndicate that is either a “registered” MIS, or an “unregistered” scheme, where shares are made available only by “personal offer”, or to “wholesale clients”, must be an AFS Licensee.

The manager, if not the promoter, of a Horse racing syndicate that is the subject of a PDS approved by a Lead regulator (Principal Racing Authority), need not be an AFS Licensee.

Requirement for Schemes to be registered and the exceptions

Horse racing syndicates that are “private” syndicates [non-commercial social groupings] are not subject to regulation under the Act.

All Horse racing syndicates that are established as the result of a promoter dealing in shares are subject to regulation as MISs’.

Under the Act and the Class Order, a Horse racing syndicate that is established as the result of a promoter dealing in shares must be registered as a MIS, unless it is either:

(a) an unregistered [personal offer] scheme;

(b) an unregistered [wholesale] scheme; or

(c) an unregistered [Lead regulator approved – Class Order compliant] syndicate.

Investors who are “retail clients” are not permitted to participate in unregistered [wholesale] schemes.

2. The standards (used as benchmarks for compliance)

Disclosure of key information

The promoter of an “offer of shares” in a Horse racing syndicate that is either a registered MIS, or an unregistered [Lead regulator approved – Class Order compliant] syndicate, must disclose to prospective investors who are “retail clients”, all key information required to enable them to make an informed decision whether or not to invest. The information is generally required to be set out in a PDS, which must be provided to prospective investors prior to the point-of-sale.

The promoter must include with the key information an appropriate ownership agreement, which will govern the future ownership of the horse(s), including provisions dealing with the appointment of a manager and a trainer, and arrangements for the payment of expenses and distribution of prize money, if any.

Handling of Application Moneys and transfer of ownership

The promoter must deposit all application moneys for shares paid by/received from investors into a designated application moneys trust account until the legal and beneficial ownership of the horse(s) is transferred to them, unencumbered. If an “offer of shares” is not fully subscribed, the promoter must refund to investors all application moneys received, together with any interest earned.

3. The sanctions (applied for non-compliance with the rules)

There are serious consequences for promoters who engage in this activity in contravention of the Act and the ARR. Enforcement action may include prosecution and the imposition of punitive penalties and/or orders requiring the payment of compensation.

4. The administrative process (to enforce the rules and administer sanctions)

ASIC is responsible for administering the Act, including surveillance activities to promote compliance, investigating suspected non-compliance and prosecuting breaches.

ASIC has appointed the Principal Racing Authorities of the various states and territories, as Lead regulators, to administer the terms of the Class Order within their respective jurisdictions.

Each Principal Racing Authority (within its jurisdiction):

(a) is responsible for administering the ARR; and

(b) has the capacity to investigate and prosecute any person it suspects of breaching the ARR; AND

as a Lead Regulator under the Class Order:

(c) is responsible for administering the syndication activities of promoters within the terms of the Class Order; and

(d) has the capacity to refer to ASIC for investigation and prosecution, any person it suspects of breaching the Act. [In fact, it is probably fair to say that ASIC has an expectation that each Principal Racing Authority will undertake appropriate surveillance activities and refer suspected breaches of the Act to it for further investigation and prosecution].

While the current regulatory regime has been in place since 2002, and is similar in effect to the previous regime, there continues to be a significant level of conflicting opinion amongst industry participants (including various Lead regulators) in relation to its application. The writer hopes that the conclusions set out in this paper will provide clarification.

Various sections of the Act and the ARR are quoted in full for the convenience of readers.