Queensland trainers on notice over potential syndication breaches

Queensland trainers have been warned against breaching ownership share regulations by advertising, offering, or selling racehorse shares to the public, as the rules governing syndications are under national review.

The Queensland Racing Integrity Commission (QRIC), the state’s racing regulatory arm, sent a notice to participants this week to remind them of their responsibilities to ensure compliance with current rules.

Under the rules that surround managed investments, a horse racing syndicate is a scheme under which a group of people agree to contribute money in return for a share of prize money.  

Syndicators fall under the jurisdiction of the Australian Securities and Investments Commission (ASIC), which has certain regulatory requirements, which are generally enforced by state-based PRAs or regulatory bodies.

As such, they must hold an Australian Financial Services Licence (AFSL), be approved by the state-based authority as a promoter and meet requirements such as an approved Product Disclosure Statement before syndicating any shares.

Trainers have generally operated outside that framework, so long as they don’t publicly promote the sale of shares. However, QRIC has sent a reminder that it is monitoring activity with many trainers having purchased horses through recent yearling sales.

QRIC has advised anyone, including trainers, who believe they are operating a syndicate and who do not meet all of the above requirements to immediately cease the activity and seek legal advice or contact the regulator.

It has also warned that anyone breaching the requirements for managed funds would be subject to action by either it or ASIC.

It has led several stables to inquire about how they might apply for an AFSL.

The email comes as ASIC reviews how it defines managed investments.

The national financial regulator reviews its definition of managed investments, including horse ownership, once every decade and could opt to tighten requirements.

If it insists on a strict application, it may mean that any trainer who wishes to sell shares in a horse may be forced to get an AFSL and fulfil requirements such as producing a PDS before offering shares.

Syndicators spoken to by The Straight have privately suggested that they believe the rules that separate syndicators and trainers are unfair.

They say it allows trainers to begin selling their horses as soon as the hammer falls, rather than waiting for a PDS.

Syndicators have generally been reluctant to speak out about what they see as a growing issue, as it may jeopardise their relationships with the trainers they engage.