ASIC Corporations (Horse Schemes) Instrument 2016/790

The instrument defines a compact set of legal concepts that determine eligibility for relief and the content of continuing duties. Those definitions and concepts frame the instrument’s mechanical operation.

• Horse racing syndicate (s4). This is a managed investment scheme whose principal purpose is racing one or more horses and distributing prizemoney to participants. If a scheme fits that definition and meets the other statutory conditions in s5(2), promoters and managers can operate without complying with subsection 601ED(5) (the usual registration requirement).

• Private horse breeding scheme (s4). This term covers private broodmare schemes and private stallion schemes. Both are types of managed investment schemes directed at horse breeding. The definition of private broodmare scheme requires that each interest is issued following either a personal offer or an offer that does not require a Product Disclosure Statement (except where s6 applies), and that the operator and associates have not issued more than 20 such interests in a rolling 12 month period. The private stallion scheme has analogous rules but a 40-interest threshold, and additional promoter requirements (s4).

• Lead regulator (s4(1)). The lead regulator is a State or Territory body responsible for administering thoroughbred or harness racing, which has entered into an MoU with ASIC that meets the instrument’s prescribed requirements, and which is approved by ASIC in writing. The instrument prescribes minimum terms for the MoU and the lead regulator’s functions, such as maintaining a promoter register, removing non-compliant promoters, approving PDSs where satisfied they are accurate and contain the information required by s5(3), reviewing PDSs within a reasonable time, monitoring advertising and complaints handling, and notifying ASIC of conduct that may breach Chapter 7 of the Corporations Act (see s4(2)(a)-(g)).

• Product Disclosure Statement (PDS) and its contents (s5(3)). For horse racing syndicates, each PDS must contain specified information required by Subdivision C of Division 2 of Part 7.9 of the Corporations Act, plus scheme-specific material: the horse name(s), promoter and manager identities, an undertaking to register the syndicate within specified timeframes, an explanation of management duties and lead regulator rules, fees and costs, conflicts, purchase and passed-in prices for each horse, vendor release statements or finance lease documentation, statutory declarations about possession and title, and a notice about participant election to test for prohibited substances under the Australian Rules of Racing (see s5(3)(a)-(m)).

• Syndicate agreement and stallion scheme agreement (s4). Syndicate agreements must be approved by the lead regulator and be legally enforceable between manager and participants. Stallion scheme agreements must be written and include a set list of provisions (exclusive relation to one stallion, first three stud seasons in-jurisdiction, tenancy-in-common title, prohibition on financing other than from the proceeds of issuing interests, application money refund provision within three days, reporting to participants and Australian Stud Book, statement of risks and speculative nature, fees and expenses disclosure, details of insurance and veterinary schedule, stud obligations, and a statement that the operator relies on this instrument) (definition of stallion scheme agreement, s4).

• Standard form finance lease (s4). Where participants acquire rights by lease rather than unencumbered title, the instrument requires that the finance lease be in a "standard form" approved by the lead regulator in relation to the syndicate.

• Personal offer (s4). This draws on subsection 1012E(5) of the Corporations Act. For private stallion schemes, any personal offer must be accompanied by a copy of the proposed stallion scheme agreement.

• Financial statements and financial year (s4). The instrument defines a financial statement for a syndicate as a true and fair profit and loss account and statement of assets and liabilities. The financial year for a syndicate is 12 months ending on 30 June or another day specified in agreement with the lead regulator.

• Limits and thresholds. Key thresholds include no more than 50 participants and maximum $500,000 raised for racing syndicates to access relief (s5(2)(b)-(c)). For private schemes, the issuance caps (20 for broodmare, 40 for stallion) control the operator’s ability to rely on private scheme exemptions (s4 definitions).

These concepts are the building blocks of the instrument. They allocate duties among promoter, manager, lead regulator and ASIC, set objective numeric gates to the relief, and define the content of disclosure and governance documentation required to operate under the relief.

The instrument designates and distinguishes several classes of actors, and allocates rights and duties accordingly. The principal groups affected are promoters, managers, participants, offerees, lead regulators and ASIC. Each has explicit roles under the instrument.

• Promoters of horse racing syndicates (s5(2)(a)). A promoter must hold an Australian financial services licence authorising the relevant financial services (s5(2)(a)(i)) and be registered by a lead regulator (s5(2)(a)(ii)) in order to access the exemption from subsection 601ED(5). Promoters who rely on the exemption must comply with a set of ongoing conditions (s5(6) and s5(7)-(14)), including providing documents to the lead regulator before use and obtaining lead regulator approval of PDSs and advertisements (s5(7)-(9)).

• Managers of horse racing syndicates (s4 definition of manager, s5(1)). Managers are responsible for operating the syndicate under the syndicate agreement and, where relying on exemption, must maintain accounting records, prepare yearly financial statements, lodge them with the lead regulator within stated timeframes, provide copies to ASIC on request, and use a separate bank account for syndicate funds (s5(5)(a)-(e)). Managers also have specified retirement and removal mechanisms in the syndicate agreement (s5(4)(a)-(b)).

• Operators of private horse breeding schemes (s6). Operators of private broodmare and stallion schemes are granted registration relief (s6(1)) and, for the operator specifically, licensing relief from s911A(1) (s6(2)). However, the relief is tightly circumscribed by the definitions of private schemes and associated thresholds (s4). Stallion scheme promoters face an extra requirement that each promoter hold either an AFSL or at least 10% fully paid of all interests (s4 private stallion scheme definition).

• Participants and offerees (s4 definitions and s5(3) content). Participants are the holders of beneficial interests (s4). Offerees are persons offered an interest. The instrument imposes obligations that affect participants’ rights: for instance, the PDS must disclose title or lease arrangements, participants may elect to have drug testing at shared cost (s5(3)(l)-(m)), and stallion scheme agreements must provide a three-day refund right for application money (s4 stallion scheme agreement(e)).

• Lead regulators (s4(1) and s4(2)). These bodies are designated by ASIC approval and must have an MoU with ASIC containing specified arrangements. Lead regulators perform functions that in other contexts would be ASIC functions: reviewing and approving PDSs, maintaining registers of promoters, monitoring advertisements, handling complaints, and notifying ASIC about conduct that may breach Chapter 7 of the Corporations Act (s4(2)(a)-(g)). The instrument therefore shifts compliance and oversight responsibilities to an industry regulator for schemes that meet the instrument’s conditions.

• ASIC (through section 3 authority and other operational hooks). ASIC remains the body with statutory authority to make the instrument and to require production of documents or information: promoters must provide assistance to ASIC on request (s5(12)), and lead regulators must lodge annual reports with ASIC (s4(2)(g)). A request by ASIC for financial statements must be complied with within 14 days (s5(5)(d)).

Who benefits and who bears compliance costs? Promoters and managers who meet the definitions of small racing syndicates or private horse breeding schemes gain relief from registration or licence requirements and some disclosure obligations. Participants and offerees receive a specified set of disclosure statements and procedural protections, but different from the default Corporations Act model. Lead regulators accept a new compliance and supervisory burden in exchange for delegated oversight. ASIC retains notification and information rights.

The instrument replaces or modifies default duties under the Corporations Act with a specific package of duties for promoters and managers, and preserves certain participant protections. Below are the principal duties and rights created or preserved by the instrument.

Duties of managers of horse racing syndicates (s5(5))

• Maintain accounting records that correctly record and explain transactions and the syndicate’s financial position sufficient to prepare financial statements (s5(5)(a)).

• Prepare financial statements for each financial year (s5(5)(b)).

• Lodge those financial statements with the lead regulator within 90 days after the end of each financial year (s5(5)(c)).

• Provide a copy to ASIC within 14 days if ASIC asks in writing (s5(5)(d)).

• Keep and use a separate account with an Australian bank for all syndicate money (s5(5)(e)).

These duties displace the usual statutory requirement to have the scheme registrar function (601ED(5)) where the exemption applies, in exchange for specific financial reporting and segregation of funds.

Duties of promoters of horse racing syndicates (s5(6), s5(7)-(14))

• Provide the lead regulator promptly with copies of the syndicate agreement, finance lease agreements, any relevant agreements involving participants, every PDS before it is given to an offeree, any other information intended for offerees, and advertisements or statements likely to induce people to acquire interests, all before publication or distribution (s5(7)(a)-(f)).

• Not give a PDS unless the lead regulator has approved it (s5(8)) and not advertise or publish inducements without lead regulator approval (s5(9)).

• Provide assistance or information reasonably required by the lead regulator or ASIC (s5(10) and s5(12)).

• Only engage in acts or omissions that the promoter reasonably believes comply with lead regulator rules and guidelines (s5(11)).

• Ensure that, before or on registration of the syndicate with the lead regulator, participants either have unencumbered title to the horses or lease them under a finance lease in the approved standard form (s5(13)).

• Comply with section 1017D of the Corporations Act as if interests were a managed investment product (s5(14)). Section 1017D relates to the general prohibition against misleading statements in financial services contexts; the instrument keeps that protection (the instrument text observes the reference).

PDS content requirements for racing syndicates (s5(3))

• The PDS must include statutory material required by Subdivision C of Division 2 of Part 7.9, plus scheme-specific items: horse names, promoter and manager names, the promoter’s undertaking to register the syndicate within prescribed timeframes, statements about manager obligations and lead regulator rules, detailed fees and costs, conflicts of interest, whether a free service to the sire was available, purchase price and passed-in price for each horse, evidence of title or finance lease, statutory declarations about possession and ensuring unencumbered title or that leases will be in standard form, confirmation of release of personal property security interests or undertaking to confirm release before or on registration, and a notice on a participant’s right to elect prohibited substance testing with costs borne by all participants (s5(3)(a)-(m)).

Stallion scheme agreement requirements (s4)

• The stallion scheme agreement must be written and include numerous provisions, such as a prohibition on financing the purchase other than by issuing interests, a requirement that participants own the stallion as tenants in common free of encumbrances, details of insurance, veterinary examination schedules, reporting and disclosure to Australian Stud Book, a requirement that the stallion stand in-jurisdiction for the first three stud seasons, a three-day refund right for applicant funds, a statement of speculative risk, and a statement that the operator relies on this instrument (s4 stallion scheme agreement items (a)-(k)).

Exemptions preserved and removed

• Registration relief from subsection 601ED(5) is the core exemption for both categories (s5(1) and s6(1)). For private horse breeding schemes, operators may also be exempt from the AFSL requirement under s911A(1) (s6(2)), and in specified circumstances hawking and much of Part 7.9 disclosure are relieved (s6(4)-(6)), but a set of financial product disclosure provisions remain applicable (s6(5) preserves s1017E, s1017F, s1020D and s1021O).

Rights for participants

• Participants have the rights that follow from PDS content and the syndicate or stallion scheme agreements. The PDS must disclose title/lease arrangements and other material facts that permit informed decisions (s5(3)). The stallion scheme agreement must include a refund right for applicants (s4 stallion scheme agreement(e)). Participants may elect to have their horse tested for prohibited substances under the Australian Rules of Racing, with cost-sharing arrangements disclosed (s5(3)(m)).

Lead regulator duties

• Lead regulators must maintain a register of promoters, remove non-compliant promoters, advise ASIC of removals, have arrangements for approving and reviewing PDSs, ensure promoters provide relevant documents, deal with complaints and disputes, monitor advertising and compliance, notify ASIC of conduct that may involve breaches of the Corporations Act, ensure employees of registered promoters are bound by the lead regulator’s rules, and lodge an annual report with ASIC (s4(2)(a)-(g)).

In short, the instrument trades off a reduced federal procedural burden for small equine schemes against a package of specific disclosure, reporting and lead regulator oversight requirements. Promoters and managers get relief from registration and, in some private schemes, from AFSL and certain disclosure obligations, but they must honour the duties described above and remain subject to lead regulator approval and ASIC information requests.

The instrument itself is an exemption instrument; it does not create new criminal offences or prescribe specific monetary penalties in its text. Enforcement implications arise from two interrelated mechanisms within the instrument’s structure.

First, the instrument ties the exemption to compliance with its conditions and to the underlying Corporations Act. The instrument is made under specific Corporations Act powers (s3 identifies subsections 601QA(1), 926A(2), 992B(1) and 1020F(1)). The instrument explicitly notes that breaches of the Corporations Act include breaches of the applicable conditions of this instrument and breaches of an Australian financial services licence (note in s4(2)(e)). That means non-compliance with the instrument’s conditions can constitute a breach of the Corporations Act and therefore expose the promoter, manager or operator to whatever civil or criminal consequences the Act prescribes for particular contraventions, or to regulatory action by ASIC, where applicable. The instrument does not set out those Corporations Act remedies in detail; those remedies remain in the Act itself.

Second, the instrument assigns a supervisory and reporting role to approved lead regulators. Lead regulators must maintain registers of promoters and remove promoters who do not comply with the lead regulator’s rules relating to the operation or promotion of syndicates (s4(2)(a)-(b)). The lead regulator must advise ASIC of any promoter removed from the register (s4(2)(c)). The instrument requires lead regulators to notify ASIC if they identify conduct that may involve breaches of Chapter 7 of the Act, in addition to any action the lead regulator may take (s4(2)(e)). This establishes a bi-level enforcement path: the lead regulator may take local administrative actions, and it must notify ASIC where conduct potentially crosses into statutory breaches under Chapter 7.

Third, the instrument provides for information-gathering and oversight by ASIC and lead regulators. Promoters must provide the lead regulator with PDSs, agreements and advertising before distribution (s5(7)(d)-(f)), and must provide assistance or information reasonably required by the lead regulator or by ASIC (s5(10), s5(12)). Managers must provide financial statements to ASIC within 14 days if asked (s5(5)(d)). These provisions create compliance checkpoints that support enforcement, because failure to provide required documents or to lodge financial statements in a timely way will be a breach of the instrument’s conditions and therefore potentially a breach of the Corporations Act.

Fourth, the instrument preserves some continued statutory obligations that are not displaced. For example, promoters that rely on the exemption for racing syndicates must comply with section 1017D of the Corporations Act as if interests were a managed investment product (s5(14)). Section 1017D concerns misleading or deceptive conduct relating to financial services; the instrument therefore retains a key consumer-protection obligation, which remains enforceable under the Act.

Practical enforcement consequences, such as pecuniary penalties, licence cancellations or injunctions, are governed by the Corporations Act and ASIC’s statutory powers rather than the instrument text. The instrument prescribes the conditions whose breach may trigger those downstream remedies, requires lead regulator notification and provides information rights to ASIC. The instrument’s enforcement architecture therefore operates by conditioning relief on compliance, placing monitoring duties on lead regulators, and preserving ASIC’s oversight capacity.

The instrument operates as a targeted modification of the Corporations Act 2001 and interfaces with other statutory and quasi-statutory regimes referenced in its text. Its interaction points are discrete and explicit.

Primary interaction with the Corporations Act

• Registration and product regulation. The instrument grants relief from the registration requirement in subsection 601ED(5) of the Corporations Act for qualifying racing syndicates (s5(1)) and private horse breeding schemes (s6(1)). It also provides AFSL relief from subsection 911A(1) for operators of private horse breeding schemes (s6(2)). Consequently, the instrument modifies the application of key Chapters and Parts of the Act for the specified categories of schemes.

• Financial product disclosure. For private horse breeding schemes the instrument relieves operators from most of Part 7.9 of the Corporations Act (s6(5)), but retains sections 1017E, 1017F, 1020D and 1021O. The instrument separately imposes bespoke PDS content obligations for horse racing syndicates (s5(3)). The text therefore substitutes scheme-specific disclosure requirements for the general Part 7.9 regime in defined circumstances.

• Misleading conduct and consumer protection. The instrument requires promoters to comply with section 1017D of the Corporations Act as if interests were managed investment products (s5(14)). This preserves at least one core statutory protection against misleading or deceptive conduct in the supply of financial services.

Links to State/Territory racing law and industry rules

• Lead regulator role. The instrument delegates substantive PDS approval, registration of promoters and monitoring of advertising and conduct to State/Territory racing regulatory bodies that are approved by ASIC as lead regulators (s4(1) and s4(2)). The MoU between ASIC and the lead regulator must include arrangements to ensure the lead regulator will approve PDSs when satisfied they contain the information required by s5(3) and sufficient other information to allow informed decisions (s4(2)(d)(i)). The instrument therefore creates a regulatory interface between Commonwealth corporate regulation and State/Territory racing administration.

• Australian Rules of Racing and Australian Stud Book. The instrument explicitly references the Australian Rules of Racing in relation to a participant’s election to test for prohibited substances (s5(3)(m)). Stallion scheme agreements must include reporting requirements for stallion returns and associated documents required to be lodged with the Australian Stud Book (s4 stallion scheme agreement(f)). These references create compliance links between the instrument’s disclosure and participant-rights requirements and established racing and breeding industry processes.

• Property security and title. The PDS obligations for racing syndicates require evidence that participants will have unencumbered title to horses or that personal property security interests registered against title have been released, or documentation that finance leases will be in approved standard form (s5(3)(l)). This interacts with personal property security regimes and title-related practices applicable to chattels, including any requirements for removal of security interests from registers.

Transitional interaction with earlier ASIC class orders

• The instrument replaces but preserves transitional operation of ASIC Class Order [CO 02/319] for certain schemes until the end of 2016 (s7(1)). Part 3 sets out how previously exempt schemes and their promoters/managers may rely on the relief in this instrument subject to specific modifications (s7(2)). Section 8 contains a transitional saving for private stallion scheme agreements previously relying on ASIC Class Order [CO 02/178]. Those transitional provisions preserve legal continuity for schemes that were operating under earlier class orders.

Limits to relief and retained statutory obligations

• The instrument explicitly reserves certain Corporations Act provisions. For example, private horse breeding scheme operators are relieved from most of Part 7.9 but not from sections 1017E, 1017F, 1020D and 1021O (s6(5)). For racing syndicates, the PDS must contain the information required by Subdivision C of Division 2 of Part 7.9 (s5(3)(a)), so key parts of the disclosure framework remain incorporated by reference.

In practice the instrument channels smaller, specialist equine schemes out of the standard federal managed-investment product architecture and into a hybrid model where lead regulators take on part of the regulatory oversight role, PDS and title/lease arrangements are tailored to the industry, and ASIC retains its oversight and notification rights. The instrument therefore creates a statutory junction between the Corporations Act and industry-specific regulatory and administrative regimes.

The compilation contains the amendment and instrument history in the Endnotes, which record the dates instruments were registered and commenced, and which provisions were changed in subsequent instruments. Key entries are these.

• Original instrument. ASIC Corporations (Horse Schemes) Instrument 2016/790 was registered for Federal Register of Legislation (FRL) on 26 August 2016 and commenced on 30 August 2016 (Endnote 1 table entry for 2016/790).

• First amendment (2016/1173). Instrument 2016/1173 was registered on 15 December 2016 and commenced on 16 December 2016. The Endnote 2 amendment history records that subsection 5(3)(i) was repealed by instrument 2016/1173 (Endnote 2 table shows Subsection 5(3)(i) rep. 2016/1173). The compilation indicates Subsection 5(3)(i) was removed; cross-reference back to s5(3) will therefore show the current list of PDS items without (i).

• Later amendment (2021/799). Instrument 2021/799 was registered on 22 September 2021 and commenced on 5 October 2021 (Endnote 1). Endnote 2 also records that subsection 6(4) was amended by 2021/799 (Endnote 2 table shows Subsection 6(4) am. 2021/799). That means the hawking relief provision (s6(4)) was modified in 2021.

• Statutory housekeeping. The endnotes show a formal repeal of section 2 by amendment to the Legislation Act (rep. s48D LA), recorded as "Section 2 rep. s48D LA" in Endnote 2. That is an artefact of legislative housekeeping and numbering.

• Transitional savings. Part 3 (sections 7 and 8) implements transitional arrangements for entities that were relying on repealed ASIC class orders (CO 02/319 and CO 02/178), and those transitional arrangements are part of the instrument’s application history (s7(1)-(4) and s8).

Practitioners should read the Endnotes to identify the precise operative text at any historical point, since the instrument compilation notes that the instrument includes any commenced amendment affecting the legislative instrument up to the compilation date (5 October 2021). The Endnotes provide the instrument numbers, FRL registration dates and commencement dates for the instrument and two amending instruments (2016/1173 and 2021/799) (Endnote 1 table).

The instrument compilation itself does not include any recorded litigation or court decisions construing the instrument. The text does not name any cases, and the Endnotes record only registry and amendment information (Endnote 1 and Endnote 2). The instrument therefore contains no litigation history in its own compilation.

Implications for practitioners. Because the instrument is an administrative exemption instrument interfacing with the Corporations Act, questions of legal interpretation or enforcement are likely to arise in:

• disputes about whether a particular scheme meets the statutory definitions (for example whether a scheme is a "horse racing syndicate" or a "private broodmare/stallion scheme" under s4);

• challenges to a lead regulator’s approval or refusal to approve a PDS or to register a promoter;

• compliance notices, directions or other enforcement action by ASIC if conduct is notified to ASIC under s4(2)(e);

• disputes arising from the operation of syndicate or stallion scheme agreements, including title, finance leases, refund rights and the manager’s duties under the syndicate agreement.

None of those outcomes appear in the instrument’s own text. Practitioners dealing with contentious issues should therefore search court and tribunal databases, ASIC enforcement notices and administrative decisions, State/Territory lead regulator determinations, and media or industry dispute records to locate any judicial or administrative rulings that interpret the instrument’s provisions. Where specific litigation or tribunal decisions exist, those authorities will be necessary to understand how courts and regulators have applied the instrument’s definitions and conditions in practice. The instrument compilation does not provide that litigation record.

The instrument contains many precise conditions and formalities. Failure to satisfy any of them can result in loss of the exemption and exposure to the Corporations Act’s default requirements. The following are salient traps and practical risks that arise directly from the instrument’s text.

1. Numeric thresholds are strict gates. For racing syndicates the instrument requires no more than 50 participants and total funds raised not to exceed $500,000 (s5(2)(b)-(c)). If a promoter issues an extra interest or accepts funds that push the total over the $500,000 cap, the scheme would cease to meet the exemption criteria. For private broodmare and stallion schemes, the counting rules (20 and 40 interests respectively in any 12 month period) determine eligibility (s4 private broodmare and private stallion scheme definitions). Operators must track interest issuances carefully.

2. Promoter AFSL requirement for racing syndicates. A promoter must hold an AFSL authorising the provision of the relevant financial services for the syndicate to rely on the racing-syndicate exemption (s5(2)(a)(i)). Promoters who lack the required licence cannot access the registration exemption even if other conditions are met.

3. Lead regulator approval is central and pre-emptive. A promoter must be registered by a lead regulator approved in writing by ASIC (s5(2)(a)(ii) and s4(1)). Before issuing a PDS or publishing advertising likely to induce acquisition, the promoter must obtain the lead regulator’s approval of the PDS and advertisements (s5(7)(d), s5(8)-(9)). Using a PDS or adverts without that approval removes the exemption and risks contravention of the Act.

4. PDS content imposes documentary burdens. For racing syndicates the PDS must include numerous items (s5(3)(a)-(m)). Notably, where participants are to have unencumbered title the PDS must include a vendor release statement and a statutory declaration that the promoter has or will have legally enforceable possession and will ensure unencumbered title before or on registration (s5(3)(l)(i)(A)-(B)). Where leases are used, copies of the standard form finance lease and a statutory declaration are required (s5(3)(l)(ii)). Meeting these documentary requirements may require promoter coordination with vendors, auction houses, financiers and registries.

5. Personal property security risks. The PDS must confirm that any personal property security interest registered against the horse’s title has been released or will be released, and confirm this to the lead regulator before or on registration (s5(3)(l)(i)(C)). Failing to ensure removal of a security interest will prevent the promoter from satisfying the PDS condition or the registration prerequisite.

6. Timing and registration windows. The instrument requires that the promoter register the syndicate with the lead regulator within 45 days after either (i) applications for the minimum number of interests are received or (ii) the minimum amount for the syndicate has been raised (s5(2)(f) and s5(3)(e) gives the promoter’s undertaking to register within 45 days). If the minimum number of interests or the minimum amount is not reached within six months of PDS approval, all application money must be repaid with interest, if any, within ten business days after that six-month period (s5(2)(e)). These timing rules are operationally strict.

7. PDS approval must precede distribution. The promoter must not give an offeree a PDS unless the lead regulator has approved it (s5(8)). Distribution of an unapproved PDS can remove the exemption.

8. Advertising prohibition without approval. Promoters must not advertise interests or publish statements likely to induce acquisitions without lead regulator approval (s5(9)). This includes social media and other modern channels; promoters must seek approval before publishing.

9. Manager duties and removal mechanics. The syndicate agreement must specify that the manager manages in accordance with the agreement and can only retire or be removed with written consent of the majority of participants not associated with the retiring manager or with lead regulator consent (s5(4)(a)). Managers should be cautious in delegating management functions without proper contractual and regulatory steps.

10. Bank account segregation and financial reporting. Managers must keep a separate Australian bank account for syndicate monies (s5(5)(e)). They must prepare financial statements annually, lodge them with the lead regulator within 90 days and supply ASIC with a copy within 14 days if asked (s5(5)(b)-(d)). Failing these recordkeeping and reporting obligations will breach the instrument’s conditions.

11. Unencumbered title versus lease. Promoters must ensure that, before or on registration, participants either have unencumbered title to the horses or lease them under a finance lease in a standard form approved by the lead regulator (s5(13)). The promoter must choose and deliver documentation that demonstrably satisfies one of those routes.

12. Stallion scheme specific requirements. Stallion scheme agreements must satisfy numerous substantive terms, including a three-day refund right for applicants (s4 stallion scheme agreement(e)), a prohibition on outside financing of the stallion purchase (s4(k)(d)), and a requirement that the stallion stand only in-jurisdiction for the first three full stud seasons (s4(k)(b)). Not meeting any of these required terms means the agreement does not meet the dictionary definition and the scheme will not qualify as a private stallion scheme for the purpose of s6 relief.

13. Hawking relief is narrow. Hawking relief for private horse breeding schemes is available only where, at the commencement of an unsolicited contact, the person could have been made a personal offer under subsection 1012E(5) of the Corporations Act (s6(4)). This is a narrow scenario and incorrect reliance may produce exposure to section 992A obligations.

14. Retained statutory protections. The instrument does not exempt operators from everything. For private horse breeding schemes, several specific sections of Part 7.9 remain applicable (s6(5)). For racing syndicates, the PDS must still contain the information required by Subdivision C of Division 2 of Part 7.9 (s5(3)(a)), and promoters must comply with section 1017D (s5(14)). Practitioners must identify those retained obligations and not assume blanket deregulation.

15. Lead regulator acceptance is discretionary and documented by MoU. The lead regulator must have a memorandum of understanding with ASIC that satisfies the instrument’s minimum requirements and must be approved in writing by ASIC (s4(1) and s4(2)). A promoter’s ability to rely on the exemption therefore depends on the existence and terms of the MoU and of ASIC’s approval.

These are concrete operational risks that arise from the instrument’s detailed mechanics. They are compliance points that require documentary controls, timely interaction with the lead regulator and careful drafting of syndicate and stallion scheme agreements.

The instrument creates a clear checklist of actions for promoters, managers and lead regulators who wish to operate under the relief. Below is a practical, source-grounded step-by-step compliance plan drawn from the instrument’s provisions.

Steps for promoters of horse racing syndicates

1. Confirm eligibility. Verify that the scheme is a "horse racing syndicate" as defined (principal purpose is racing and distribution of prizemoney) and that the total number of participants will be no more than 50 and the total amount to be raised will not exceed $500,000 (s4 definition and s5(2)(b)-(c)).

2. Hold or obtain the AFSL required. Ensure the promoter holds an Australian financial services licence authorising provision of the relevant financial services in relation to the syndicate (s5(2)(a)(i)). If not, obtain the licence before promoting the scheme.

3. Register with an approved lead regulator. Identify a lead regulator that is approved by ASIC in writing and registered to accept promoters for this instrument, and complete promoter registration with that lead regulator (s5(2)(a)(ii); s4(1)).

4. Prepare the PDS in accordance with s5(3). Draft the PDS to include all required elements: Subdivision C materials of Part 7.9, horse names, promoter and manager names, the undertaking to register within 45 days after receiving the minimum number of applications or raising the minimum amount, manager duties and lead regulator rules, fees and costs, conflicts, free service to sire statements (if relevant), purchase and passed-in prices, vendor release statements or finance lease copies, statutory declarations concerning possession and title, confirmation regarding release of personal property security interests or undertaking to confirm release before registration, and the participant drug-testing notice (s5(3)(a)-(m)).

5. Obtain lead regulator approval of PDS and advertising. Provide the PDS and any advertising or inducement statements to the lead regulator before distribution for approval (s5(7)(d)-(f); s5(8)-(9)). Do not provide a PDS to an offeree or publish advertising until the lead regulator has approved it.

6. Secure title or arrange standard-form finance lease. Before or on registration with the lead regulator, ensure participants will have unencumbered title to the horses or that participants will lease horses under a finance lease in the standard form approved by the lead regulator (s5(13); s4 standard form finance lease). If title is promised, obtain vendor release statements and record statutory declarations about possession; if leases are used, supply the standard-form lease to the lead regulator and prepare the statutory declaration required by s5(3)(l)(ii).

7. Maintain financial controls and reporting. Establish a separate account with an Australian bank for syndicate monies and use it for all receipts and payments related to the syndicate (s5(5)(e)). Keep accounting records sufficient to prepare financial statements (s5(5)(a)). Prepare annual financial statements and lodge them with the lead regulator within 90 days of the end of the financial year (s5(5)(b)-(c)). Be prepared to provide the statements to ASIC within 14 days if requested (s5(5)(d)).

8. Manage participant protections and refunds. If minimum numbers or amounts are not achieved within six months after PDS approval, repay application monies with interest, if any, within ten business days after that six-month period (s5(2)(e)). Ensure PDS disclosures on refundable application money are accurate.

9. Monitor advertising and compliance obligations. Ensure that all employees and associates comply with lead regulator rules (s4(2)(f)) and that the promoter does not engage in acts or omissions contrary to lead regulator rules (s5(11)). Provide assistance and information to the lead regulator and to ASIC on request (s5(10) and s5(12)).

Steps for managers of horse racing syndicates

1. Receive appointment per syndicate agreement. Ensure the syndicate agreement is approved by the lead regulator and is legally enforceable between the manager and participants (s4 syndicate agreement definition and s5(2)(g)).

2. Manage in accordance with the agreement. Manage the syndicate in accordance with the syndicate agreement throughout its duration unless retirement or removal occurs in the ways specified by the agreement (s5(4)(a)-(b)).

3. Maintain records and reporting. Keep accounting records and prepare financial statements for each financial year (s5(5)(a)-(b)). Lodge statements with the lead regulator within 90 days after year end and supply to ASIC if requested within 14 days (s5(5)(c)-(d)). Use the separate bank account specified by s5(5)(e).

Steps for operators of private horse breeding schemes

1. Confirm private-scheme definition. Confirm that the scheme fits the private broodmare or private stallion scheme definitions in s4 (principal purpose is breeding; interests issued only as a result of personal offers or offers that do not need a PDS other than because of s6; issuance caps over 12 months for operator and associates).

2. For stallion schemes, satisfy promoter requirements. For private stallion schemes, ensure each promoter holds either an AFSL or at least 10% fully paid of all interests in the scheme (s4 private stallion scheme definition).

3. Use personal offers appropriately. Where personal offers are used, ensure the offers meet the definition of personal offer in subsection 1012E(5) of the Act and, for stallion schemes, are accompanied by a copy of the proposed stallion scheme agreement (s4 personal offer definition).

4. Observe hawking limits. Rely on the hawking relief in s6(4) only where the offeree was a person to whom a personal offer could have been made at the commencement of the unsolicited contact.

5. Understand the disclosure relief boundaries. If relying on the Part 7.9 relief in s6(5), be aware that sections 1017E, 1017F, 1020D and 1021O of the Act remain applicable; identify those sections and confirm the scheme complies with them.

Syndicate and stallion agreement drafting checklist

• Include the terms the instrument requires: manager’s duties and retirement/removal rules, ownership or leasing arrangements, refund provisions for stallion schemes, prohibition on outside financing for stallion purchases, reporting obligations to the Australian Stud Book (for stallion schemes), fee disclosure, insurance and veterinary schedule, statement of speculative risk, and an explicit statement that the operator relies on this instrument (s4 stallion scheme agreement items (a)-(k)).

Lead regulator cooperation

• Enter into and maintain the MoU with ASIC satisfying the instrument’s minimum MoU content (s4(2)).

• Maintain a register of promoters and remove non-compliant promoters, notify ASIC of removals, review and approve PDSs within a reasonable time, and lodge an annual report of the lead regulator’s performance in the functions specified (s4(2)(a)-(g)).

Transitional schemes

• If operating under an existing exempt scheme that relied on ASIC Class Order [CO 02/319], follow section 7 transitional arrangements and the modifications to application of instrument conditions set out in s7(2)(a)-(g). For existing private stallion scheme agreements relying on CO 02/178, consult s8 for the saving provision.

Operational compliance practices

• Maintain control calendars for PDS approval, registration windows (45 days), six-month fundraising deadlines and the 90-day financial statement lodgement deadline.

• Keep contemporaneous statutory declarations and vendor release statements required by s5(3)(l).

• Maintain audit-ready accounting records and a separate bank account for each syndicate.

• Implement a pre-publication approval workflow for all promotional materials to ensure lead regulator approval before release, and document approvals.

• Monitor issuance counts for private schemes to ensure the operator and associates remain within the 12-month caps.

Following these steps, and grounding practices in the cited sections of the instrument, will position promoters, managers and lead regulators to operate under the instrument while meeting its documentary, timing and operational conditions.