On Wednesday, 31 August 2016, the Australian Securities and Investment Commission (ASIC) published a Media Release number 16-282 to announce the creation and implementation of new legislation that is applicable to both Lead Regulators as well as Licensed Promoters of Horse Racing and Breeding Schemes.
Following public consultation, ASIC has released a new legislative instrument on horse schemes, named ASIC Corporations (Horse Schemes) Instrument 2016/790.
This in essence amalgamates and streamlines the existing three (3) class orders on horse racing syndicates and horse breeding schemes that were due to expire (‘sunset’) on 1st October 2016 and 12 months later where it referred to breeding schemes.
The key changes made to the terms of the relief for horse racing syndicates to come into force on the 1st January 2017 are:
(1) Raising the investment limit for a horse racing syndicate from $250,000 to $500,000;
(2) Increasing the maximum number of members for a horse racing syndicate from 20 to 50;
(3) Formalising the co-regulatory arrangements between ASIC and the lead regulators; and
(4) Imposing additional content requirements for a product disclosure statement for a horse racing syndicate.
Specific benefits of the new instrument is to ensure different State’s acting as Lead Regulators under co-regulatory processes, have a uniform approach to regulatory and compliance that does not vary by interpretation on a state by state basis.
Further this will ensure each licensed promoter offers shares in horses on an equal and comparable basis, no matter where they are licensed in Australia, with the main regulatory emphasis on greater disclosure to investors in a uniform minimum disclosure basis.
ASIC has replaced the following class orders with new legislative instrument 2016/790:
Class Order [CO 02/319] Horse racing syndicates, which was due to sunset on 1 October 2016;
Class Order [CO 02/172] Horse breeding schemes: private broodmare syndication, which was due to sunset on 1 October 2017; and
Class Order [CO 02/178] Horse breeding schemes: private stallion syndication, which was due to sunset on 1 October 2017.
The relief provided under all three class orders has been combined into this single instrument. The horse scheme class orders have been remade without fundamental changes so that the effect of the relief provided by the class orders will be preserved without any disruption to those who rely on them. The previous class orders have now been repealed.
In relation to horse breeding schemes, no significant changes were made to the terms of the relief.
ASIC also updated Regulatory Guide 91 Horse Racing and Breeding to reflect the terms of the new legislative instrument.
ASIC’s Consultation process:
On 13 November 2015, ASIC released Consultation Paper 242 Remaking ASIC class orders on horse racing syndicates and horse breeding schemes, which publicly consulted on proposals to remake our class orders on horse racing syndicates and horse breeding schemes (refer ASIC Media Release 15-335). In CP 242, ASIC proposed to remake the class orders without fundamental changes.
A report on submissions is located on the ASIC website. This report highlighted key issues from the submissions and ASIC's responses. ASIC received submissions, which raised a range of issues.
Background:
Under the Legislation Act 2003, all class orders sunset after a specified period of time (mostly 10 years) unless ASIC take action to exempt or preserve them. This ensures that legislative instruments like class orders are kept up to date and only remain in force while they are fit for purpose and relevant.
All government organisations are responsible for considering whether the legislative instruments they have made that are due to sunset will be relevant after their sunset date.