Dynamic Syndications is the highest profiled
"licenced syndicator" within the thoroughbred industry. We are the holders of
AFS Licence 336808. We meet all compliance obligations under our licence, which protects investors and their funds.
Investors looking at buying into shares in racehorses in 2014, should be acutely aware of the risks associated of dealing with unlicensed promoters.
Investors should only buy horses from fully licenced promoters.
This was brought to the public’s attention in a graphic manner, with the spectacular collapse of thoroughbred trading company BC3 and highlighted the significant risks taken by investors who unwisely decide to spend their hard earned dollars with such non-licensed, non-compliant rogue operators.
The Australian Securities and Investment Commission (ASIC) regulate investments under the Corporations Act. They have endorsed the Racing Authority in each state to be their representative and to act as the industry’s Lead Regulator.
This is accepted because the Racing Industry is subject to the Australian Rules of Racing and is administered by Stewards and Regulatory Officers.
Promoters of thoroughbreds for racing purposes, are required to be licensed when they advertise shares whether by: TV, radio, print, website, email marketing or any other way of advising that shares are available.
It’s vital that investors realise that this legal obligation applies equally to all licenced trainers as it does to licenced promoters however there has been a reluctance to this point by Lead Regulators to enforce this compliance upon trainers however Racing NSW have at least been advising trainers of their obligations when these rules are breached.
Specifically though, in our opinion the most important issue at present is the enforcement of compliance on a few rogue promoters. The BC3 modus operandi unfortunately is being copied by several thoroughbred trading ventures and our legal advice under the ASIC guidelines and the Corporations Act is this is a breach.
Promoters of thoroughbreds MUST be licenced. It’s not an arbitrary arrangement; it’s a requirement at law. The high percentage of promoters are licenced correctly and comply with the regulatory compliance required by ASIC to be in place to protect investors.
There are two licenses which apply under the Corporations Act. They are determined by the total commercial value of the promotion with $250,000 as the threshold.
With promotions over the value of $250,000, promoters
MUST have a full
Managed Investment Scheme License. For less than $250,000 they must obtain a restricted licence by way of relief under the Class Order and comply by lodging a PDS for promotions.
So Why Is This Important For Investors To Be Aware of the Differences ?
The Australian Securities and Investment Commission is established as a primary regulator to protect investors and ensure regulatory compliance by good corporate citizens.
In the 1980’s investment in thoroughbreds was a risky pursuit as unscrupulous operators ran roughshod over an unregulated industry. This was clamped down upon after a barrage of complaints from investors.
Today, licenced promoters of thoroughbreds for racing purposes, are the most highly regulated industry body in the Southern Hemisphere. This has returned confidence back to the market for investors because they have so many safeguards in place to protect them and their funds.
For example:
(1) Investors funds are required at law, to be deposited into
an individual trust account for the specific promotion and those funds must remain in trust on the investors behalf until the horse is either registered with the racing authority into the names of the investors or the promotion does not proceed, where under that circumstance, the funds must be returned to the investors in full, within 10 days of the promotion no longer proceeding.
(2) Licenced syndicators are required to have their
trust accounts audited annually and lead regulators are also permitted to do spot checks upon promoters, reviewing clients funds deposited into the trust accounts throughout the term of the promotion.
(3) Professional Indemnity Cover is mandatory to protect the investors on each promotion.
(4) S
urplus Liquid Assets ratio (SLA) that must be maintained at all times by all licensed syndicators, to ensure liquidity of the promoter should any actions be warranted.
(5) The accounts of each promotion must be maintained in a
separate trust account specifically for that promotion.
(6) Annual audited sets of accounts must be lodged with the lead regulator within
90 days of the close of each financial year.
(7) The use of a
Product Disclosure Statement (PDS) approved by the lead regulator for each individual horse promotion.
(8) Access to the use of an independent and dedicated complaints system through statutory membership of the
Financial Ombudsman Service Limited.
(9) Access to
complaints systems to the
Lead Regulator being the Racing Authority of each state and access to
ASIC complaints register
(10) Protection under the
Australian Rules of Racing to which licenced syndicators must comply and intervention by the Stewards would apply should any breach occur under the
Bloodstock Industry Code of Practice and / or the Australian Rules of Racing.
(11) Restrictions under the Corporations Act that no promotion can have more than
20 natural persons in the ownership.
(12) A requirement to have
a full veterinary certificate as to the suitability of the horse for promotion with specific regard to confirmation, x-rays, endoscopic evaluation.
(13) Confirmation
declaration letter by the proposed trainer that they are in full knowledge and acceptance that the horse will be promoted with them being the nominated trainer.
(14) Racing Syndicate Deed setting out the full rights and obligations of all co-owners with regards to racing entitlements, prizemoney, trophies, etc.
(15) A fully itemised
Cost Sheet highlighting the purchase price of the horse, every cost that has been incurred such as, sales expenses, transport, agistment, insurance, breaking-in fees, pre-training costs, veterinary, forward budgeted holding costs to a specific date.
Then licenced syndicators must also declare their profit margin allocated to the promotion for investors to make fully informed decisions.
(16) Promoters must obtain a
release document from the auction house where the horse was purchased showing the account had been paid up in full and title has passed to the promoter.
With these safeguards in place for investors, the transparency and integrity of our industry is maintained and any problems that may lead to breaches or potential breaches are quickly identified.
For investors, it’s all about the process and ensuring there is at all times, Full Disclosure which ensures that investors are safeguarded and actually do receive what they pay for.
Our concerns moving forward for potential investors remain that there are several other high profiled industry operatives, offering and selling shares in thoroughbred horses for racing purposes without an appropriate licence with more than 20 participants and where the value is either over or under $250,000 where they should be correctly licenced.
There is no reason to think that in the future these same problems of BC3 can’t repeat themselves and therein lays the current challenge for the regulators and auction houses to police such operations.
If investors are not using the services of a licenced syndicator, they place themselves at risk of unscrupulous operators whom do not comply with any of the above 16 legal requirements.
Investors that deal with such non compliant traders are playing Russian Roulette with their investment dollars, lack of accountability and investor protections.
The message is simple – Only invest with Licenced Promoters.