Snapshot - Regulation of Horse Breeding Schemes and Horse Racing Syndicates in Australia

Horse racing is a popular sport and a lucrative industry in Australia, but it also involves complex legal and regulatory considerations. One of these considerations is the regulation of investments in horse racing, such as buying shares or joining syndicates to own or breed racehorses.

Types of investment schemes and syndicates relating to racehorses include:

• Broodmare Schemes - a broodmare or broodmares are bought and maintained and their offspring sold for the benefit of members;

• Stallion Schemes - where a stallion or stallions are bought and stud services by the stallion(s) provided for the benefit of each of the members of the scheme; and

• Horse Racing Syndicates - a scheme that has a principal purpose of racing one or more horses and distributing prizemoney won by the horse or horses to the members of the scheme. These offerings are governed by the terms of a Syndicate Agreement.

Offers to obtain an interest in these schemes/syndicates are typically made by way of the sale of units in a trust, shares in a company or interest in a partnership.

Any person seeking to offer an interest in a breeding scheme or horse racing syndicate should be aware that such activity is regulated by the Corporations Act 2001 (Cth) (CA). This means that the person may need to:

• register a public company to operate the relevant scheme;

• obtain an Australian financial services (AFS) licence;

• issue a detailed Product Disclosure Statement in relation to the interest offered;

• register the scheme with ASIC as a managed investment scheme,

or otherwise rely on conditional relief provided by ASIC or exclusions provided in the CA.

Obtaining an AFS licence is not a simple or inexpensive exercise, and it can significantly increase the costs of establishing a breeding scheme or syndicate.

ASIC has issued a regulatory guide (RG 91) that sets out its approach to regulating certain horse breeding schemes and horse racing syndicates. The guide explains the criteria and conditions for obtaining relief from the AFS licensing and disclosure requirements for these schemes and syndicates. Some exclusions for small-scale offerings are available which may remove the need for an offeror to hold an AFS licence, issue a PDS or register the scheme where the scheme:

• has no more than 20 members in total; and

• is not promoted by a person in the business of promoting these interests.

ASIC also provides conditional relief for some of the CA’s requirements to hold an AFS licence, issue a PDS or register the managed investment scheme with it in ASIC Corporations (Horse Schemes) Instrument 2016/790. This Instrument deals with relief provided for:

• operators of small-scale private broodmare and stallion schemes from the CA requirements to register a managed investment scheme, hold an AFS licence and give PDS disclosure; and

• small-scale horse racing syndicates from the requirement to register a syndicate as a managed investment scheme under Ch 5C of the CA. 

The regulation of investments in horse racing is intended to protect investors and promote fair and transparent markets. It also reflects the public policy objectives of ensuring the integrity and sustainability of the racing industry in Australia.

Matt Krog

Director