[PS 20] Policy Statement 20 Horse racing schemes

Transcription

1 ASIC POLICY STATEMENTS [PS 20.3] [PS 20] Policy Statement 20 Horse racing schemes Chapter 7 Securities Issued 4/5/1992 Updated 15/3/1993, 24/1/1994, 6/12/1994, 26/2/1996 Note: See [PS ] [PS ] for information about how this policy statement applies to managed investment schemes. Headnotes Horse racing schemes; prescribed interests; exemption from the requirement to issue a prospectus and to have an approved deed in certain circumstances; racing clubs as lead regulators; role of lead regulators; promoters of horse racing schemes required to hold dealer s licence; conditions of licence; liability of promoters; secondary sale of interests. Purpose [PS 20.1] In this policy statement, the ASC sets out its policy on the regulation of certain horse racing schemes which involve the offer of a prescribed interest, or an invitation to subscribe for or buy a prescribed interest in the form of an interest in a horse racing scheme. This policy statement supersedes NCSC Release 124. Background [PS 20.2] It is common practice for a racehorse to be owned or leased by a group of people who contribute to its purchase price or lease costs, to its training and other continuing costs and who share in its winnings (if any). Such an arrangement is referred to in this Policy Statement as a horse racing scheme or scheme. [PS 20.3] A person who offers an interest in a horse racing scheme which constitutes a prescribed interest is required to comply with the Corporations Law (Law), and in particular with the provisions of Div 2 and 5 of Pt 7.12 of the Law. These provisions require, among other things, the person making the offer (the promoter) to: (a) be a public corporation; 1

2 [PS 20.3] ASIC POLICY STATEMENTS (b) enter into an approved deed; (c) appoint an approved trustee or representative; and (d) lodge and register a prospectus. [Historical note: PS 20.3 amended 24/1/1994 by deleting to sell, or invites people to buy after the word offers and by replacing such an offer or invitation with the offer.] [PS 20.4] Where a scheme involves the offer of a prescribed interest, the promoter is also required to comply with the provisions of Pt 7.3 of the Law, which, among other things, requires such a person to hold a dealer s licence. [PS 20.5] The ASC has in the past been prepared to grant conditional relief from compliance with the provisions of Div 2, 3 and 5 of Pt 7.12 of the Law (the fundraising provisions) except s1022. [PS 20.6] Following a review of the existing system of co-regulation and in consultation with the principal racing clubs in Australia, the ASC has decided to continue its policy regarding horse racing schemes, with some modifications. [PS 20.7] The ASC has now: (a) executed an instrument of exemption dated 21 April 1992 (see [CO 92/327]) which was modified on 8 March 1993 (see [CO 93/144]), on 16 December 1993 (see [CO 93/1691]) and on 6 December 1994 (see [CO 94/1824]); (b) in effect revoked its instrument of exemption dated 24 April 1991 [91/242] (see 1994 ASC Digest at page CO 82) in relation to schemes promoted after the date of the instrument; (c) formulated standard conditions to be imposed by the ASC in respect of all dealers licences (the licences) issued to promoters of horse racing schemes who wish to come within the terms of the exemption; and (d) provided for the modified application of Div 6 of Pt 7.12 of the Law (the sharehawking provisions) to schemes which fall within the terms of the exemption. [Historical note: PS 20.7(a) amended 24/1/1994 by deleting new before an instrument. Further amended 6/12/1994 by inserting on 16 December 1993 ([93/1691]) and on 6 December 1994 ([94/1824]);. Para (b) amended 24/1/1994 by deleting new before instrument (second occurring). Para (d) substituted 24/1/1994. The paragraph formerly read: (d) extended the relief granted to include Division 6 of Part 7.12 (the sharehawking provisions) ] 2

3 ASIC POLICY STATEMENTS [PS 20.9] [PS 20.8] The role of the principal racing clubs as lead regulators is set out in para of this policy statement. [PS 20.9] This policy statement summarises the conditions upon which relief from the fundraising provisions of the Law, other than s1022, and the sharehawking provisions will be granted and summarises the conditions which will be imposed by the ASC in respect of the licences. It also comments on other aspects of the Law relevant to horse racing schemes. 3

4 [PS 20.10] ASIC POLICY STATEMENTS [PS 20.10] Promoters of schemes which involve the offer of prescribed interests, but which do not meet the terms of the exemption, will continue to be required to comply with all applicable provisions of the Law. Policy considerations [PS 20.11] The ASC has adopted a policy of co-regulation for certain types of horse racing schemes. Under the co-regulation arrangements, the principal racing clubs have agreed to act as lead regulators in relation to schemes which meet specified criteria. The ASC will continue to be involved in the regulation of those schemes primarily through its licensing role and by overseeing the lead regulators activities. [PS 20.12] The co-regulation arrangements are designed to ensure that the interests of investors in these schemes will continue to be protected, and that at the same time due recognition is given to the regulatory role played by the principal racing clubs and to their particular expertise. The exemption [PS 20.13] Persons who obtain relief under the new instrument will not have to comply with Div 2 of Pt 7.12 (other than s1022) and Div 3, 5 and 6 of Pt Accordingly, such a person will not be required to be a public corporation, enter into an approved deed, appoint an approved trustee or representative or lodge or register a prospectus. [24/1/1994] Horse racing schemes to which the exemption applies [PS 20.14] A horse racing scheme to which the co-regulation arrangements apply, and the promotion of which may therefore fall within the terms of the Class Order, is one which meets the following description: (a) its promoter is on a register of promoters kept by a lead regulator approved by the ASC; (b) when fully subscribed, it will be registered by a lead regulator approved by the ASC; (c) the subject of the promotion is a specified horse (or horses); (d) prior to its registration with a lead regulator, the participants in the scheme either have unencumbered title to the whole of the scheme horse (or horses), or lease the whole of the scheme horse (or horses) pursuant to a finance lease agreement in a standard form approved by the relevant lead regulator; (e) the scheme s principal purpose is the racing of that horse (or horses); 4

5 ASIC POLICY STATEMENTS [PS 20.16] (f) the scheme does not comprise more than 20 members; and (g) the total amount sought by way of subscription from participants in the scheme does not exceed $250,000. [24/1/1994] Conditions of the exemption [PS 20.15] Where a horse racing scheme meets the above description, promoters who wish to take advantage of the exemption must: (a) provide the lead regulator with a copy of all relevant documents, including all disclosure statements and advertisements concerning the horse racing scheme; (b) provide all prospective participants with a current disclosure statement, approved by the lead regulator; (c) obtain the approval of the lead regulator before any advertisement is published; (d) provide any assistance and information required by the lead regulator and the ASC; (e) comply with all relevant rules and guidelines of the lead regulator; (f) state in the disclosure statement whether the promoter proposes to manage the scheme, and if not, state that a participant in the scheme will be required to manage it in accordance with the terms of any agreement governing the scheme approved by the lead regulator, and in accordance with any rules, regulations or guidelines issued by the lead regulator; (g) register the scheme with the lead regulator within 45 days of it being fully subscribed; (h) if a scheme is not fully subscribed within 6 months of the date on which the lead regulator approved the disclosure statement, repay within 10 days all subscription money received, with interest if any; and (i) accept liability for its representatives. [PS 20.16] Each horse racing scheme must have a manager, who may be the promoter or another person. The manager must continue to manage the scheme throughout its duration, unless: (a) he or she retires with the prior written consent of a majority of scheme members; (b) he or she is removed in accordance with the terms of the scheme agreement; or (c) he or she retires or is removed with the consent of the lead regulator. 5

6 [PS 20.17] ASIC POLICY STATEMENTS [PS 20.17] A further condition of the exemption requires the manager to keep proper books and records for each scheme, file annual accounts for each scheme with the lead regulator, and, if requested to do so, with the ASC. The manager must also operate a separate bank account for each scheme. [6/12/1994, 24/1/1994] Accounting obligations of the manager [PS 20.17] The manager of a horse racing scheme has certain accounting obligations in relation to each scheme. They are set out in full in Class Order [92/327]. In summary the manager must: (a) keep proper accounts for each scheme; (b) prepare a profit and loss account and statement of assets and liabilities for each scheme at the end of each financial year. The manager must lodge these accounts with the relevant lead regulator within 90 days two months after the end of the financial year. The ASC may also write to the manager asking that these accounts be lodged with the ASC; and (c) operate a separate bank account for the moneys of each scheme. [6/12/1994, 24/1/1994] [PS 20.17A] These accounting obligations are imposed by the terms of the agreement which governs the scheme. If the manager does not meet these obligations scheme participants may take legal action against the manager. If the manager of the scheme is also its promoter then that person must also comply with the accounting obligations of promoters (see para 22). [6/12/1994, 24/1/1994] Approval of lead regulators [PS 20.18] Lead regulators have been and may be approved by the ASC if they can establish that they are prepared, and have the necessary expertise, to perform a monitoring function. The lead regulators who presently have the approval of the ASC are noted in the Class Order. They are: Australian Jockey Club; Victorian Racing Club; South Australian Jockey Club; Queensland Principal Club; Western Australian Turf Club; Western Australian Trotting Association; Tasmanian Thoroughbred Racing Council; Alice Springs Turf Club; Darwin Turf Club; and Harness Racing Authority of NSW and The Queensland Harness Racing Board. [24/1/1994, 15/3/1993] [PS 20.19] The role of the lead regulator is: 6

7 ASIC POLICY STATEMENTS [PS 20.22] (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) to keep a register of all promoters of horse racing schemes to which the co-regulation arrangements applies; to register schemes which the lead regulator has agreed to regulate; to ensure that a promoter s disclosure statement or offer document contains sufficient information to allow investors to make an informed decision and to check the accuracy of this information; to approve the agreements which establish the scheme; to approve advertising in relation to the scheme; to ensure that promoters and managers of schemes lodge the reports and accounts which they are required to lodge with the lead regulator; to deal with any complaints; to implement adequate surveillance, enforcement and disciplinary procedures; to refer cases which may involve breaches of the Law or of licence conditions to the ASC; to discipline promoters for failure to comply with the lead regulators rules; to remove from its register any promoter who fails to comply with the lead regulator s rules relating to the promotion and operation of horse racing schemes and to remove any person from its register if so requested by the ASC; and to advise the ASC of the name of any promoter who has been removed from the register of promoters. [PS 20.20] Lead regulators will only continue to act in that capacity where the ASC is satisfied that this role has been fulfilled. Licences [PS 20.21] It is a condition of the exemption that Promoters of horse racing schemes of the type to which the exemption applies must hold a dealer s licence issued by the ASC. The ASC will only issue tthese licences will be issued only to persons who have been provisionally are registered on a register of promoters kept by a lead regulator and where the registration is provisional only subject to such a licence being issued. [21/1/1994] [PS 20.22] In addition to the conditions and restrictions prescribed under the Law, these licences will be subject to standard conditions. the effect of which will be to These require a promoter to: [21/1/1994] 7

8 [PS 20.22] ASIC POLICY STATEMENTS (a) maintain an approved security in favour of the ASC for $10,000; (b) permit inspection of the licence; (c) return the licence to the ASC if it is revoked, suspended or cancelled; (d) keep proper accounts in respect of each scheme during its promotion; (e) prepare a profit and loss account and statement of assets and liabilities for the promoter s business at the end of each financial year. The promoter must lodge these accounts with the relevant lead regulator within 90 days two months of the end of the financial year. The ASC may also write to the promoter asking that these accounts be lodged with the ASC; file annual accounts in respect of the promoter s business with the lead regulator, and, if requested to do so, with the ASC; (f) operate a separate trust account for each scheme, to be used solely for that particular scheme; and (g) comply with the provisions of Div 1 and 3 of Pt 7.3 of the Law that apply to the holder of a dealer s licence; (hg) ensure that any representatives comply with the requirements of the Law with respect to representatives; (i) acquaint itself and comply with the relevant provisions of the Financial Transaction Reports Act 1988 (Cth) and s243d of the Australian Securities Commission Act 1989; and (j) if the promoter is a corporation, have a key person who is approved by the relevant lead regulator and keep the ASC informed of the name and address of that person. [6/12/1994, 24/1/1994] [PS 20.23] Licences will also be subject to the condition that the licensee does not carry on under that licence any securities or investment advice business other than in relation to the promotion of horse racing schemes to which the exemption applies. [PS 20.23A] Promoters should give a copy of its licence to the relevant lead regulator so that its registration on the register of promoters can be completed. If the promoter continues as manager of a horse racing scheme that person must also comply with the accounting obligations of a manager described in para 17 above. [24/1/1994] Existing licensees [PS 20.24] The ASC proposes to bring existing licences held for the purpose of promoting horse racing schemes subject to the exemption into line with the licence conditions referred to in this Policy Statement. 8

9 ASIC POLICY STATEMENTS [PS 20.28] Liability for prospectuses and advertisements [PS 20.25] The definition of prospectus in s9 of the Law does not exclude an offer document merely because an exemption from the prospectus provisions has been obtained. Therefore, an offer document which falls within that definition must comply with s1022 of the Law and will still be subject to the liability provisions of the Law. [PS 20.26] Promoters will be subject to the prohibitions in s995 and s996 in relation to advertising of horse racing schemes whether by prospectus or otherwise. Sections 995 and 996 prohibit: (a) engaging in conduct that is misleading or deceptive in relation to dealings in securities; and (b) making false or misleading statements or material omissions in relation to prospectuses. Secondary trading sales of interests [PS 20.27] Relief under the Class Order is only provided to promoters registered with a lead regulator. A person who owns an interest in a horse racing scheme, and who wishes to sell it, must comply with all the provisions of the Law, including the obligation to prepare, and lodge and, if appropriate, register a prospectus. a notice complying with s1043d of the Law and reg C(2). [26/2/1996, 6/12/1994] [PS 20.27A] Vendors of interests in a horse racing scheme should be aware that relief may be available to them from the obligation to prepare and lodge a s1043d secondary trading notice: see Policy Statement 105 on secondary trading relief section 1043D notices. [26/2/1996, 6/12/1994] Inquiries by promoters [PS 20.28] Initial inquiries about the promotion of schemes which are the subject of the co-regulation agreement should be directed to the relevant lead regulator as the ASC will not issue a dealer s licence to promoters until they are registered with a lead regulator. 9