Withdrawal of Approved Promoter Licence
Effective 01 August 2020, Kinematic Thoroughbred Services withdraws its Approved Promoter’s licence in Victoria, New South Wales and South Australia.
The following factors have contributed to this decision.
- Inconsistent and unclear policies relating to the regulation of the sale shares in horses since Kinematic Thoroughbred Services became an Approved Promoter in 2014, particularly the policies of Racing Victoria (RV) and Thoroughbred Racing South Australia (TRSA).
- Uncertainty in the future regulation of the sale of shares in horses, particularly in Victoria, limiting our ability to confidently invest in our business and support trainers and breeders.
- The lack of desire shown by Racing Australia and Principle Racing Authorities (PRAs) to protect consumers against the risks of non-disclosure, conflicts of interest, money laundering and impropriety in financial transactions relating to the purchase and sale of horses and horse shares.
- RV’s failure to fulfil a promise made on 21 August 2019 to engage Approved Promoters and other stakeholders in their process towards a self-regulation model to regulate the sale of shares in horses.
I have shared further detail on the reasons for my decision below.
My passion for racehorse ownership and the breeding and racing industry, is matched only by my passion for protecting consumers with adequate disclosure, transparency and security.
It is for these two reasons that we successfully sought an Australian Financial Services License (AFSL) and Approved Promoter’s licence in Victoria, New South Wales and South Australia. We then introduced our financial service to connect buyers with trainers and breeders (Sellers) and comply with Australian Securities and Investment Commission (ASIC) regulations, Australian Rules (AR) and Local Rules (LR) of Racing, and Principle Racing Authority (PRA) policies when syndicating their horses.
This financial service has conveyed clear title, benefit and risk of ownership to buyers of racehorse shares. The transparency in our processes and documentation provided comfort and security to buyers, particularly new owners who have made up approximately 15% of all buyers we have assisted.
Legal protection extended to Sellers also, ensuring compliance with the Corporations Act, the Sale of Goods Act, the Anti-Money Laundering and Counter-Terrorism Financing Act and ASIC’s Instrument 2016/790 regulating the sale of racehorse shares. It enabled Sellers to advertise freely and afforded them indemnity insurance.
However, Racing Australia (RA) and Principle Racing Authorities (PRAs) are not displaying the same level of urgency to protect buyers of horses at public auction or buyers of shares in racehorses.
Unless you are an Approved Promoter and AFSL holder there is no requirement in the Australian Rules of Racing (AR) or Local Rules of Racing (LR) in each state for a Seller of horses or shares in horses to:
- disclose any prior interest in the horse being offered for sale or its sire or its dam;
- disclose any benefit, rebate, commission or reimbursement from any person in relation to or in connection with the purchase or sale of a horse or shares a horse;
- disclose whether the Seller holds unencumbered title to the horse offered for sale, or if the title to the horse is subject to any encumbrance, specify the arrangements to discharge those encumbrances;
- discharge any encumbrances and release security interests held on the Personal Properties Security Register (PPSR) within an agreed timeframe;
- use funds received from buyers for their intended purpose; or
- comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) obligations and notify AUSTRAC or PRAs of any suspected forging of identity or suspicious sources of funding.
That is an unacceptable risk to buyers of horses and buyers of shares in horses over a period of time that often last several months or more. RA and the PRAs are doing little to protect the industry from the poor public perception it has earned with regards to financial transactions.
Further, in Victoria where our service has predominantly been offered, RV has seemingly modified its interpretation of ASIC’s Instrument 2016/790 and no longer seem to require trainers, bloodstock agents or other unlicensed entities selling shares in horses to comply with that Instrument. RV have seemingly withdrawn all policies that were documented in 2014 when Kinematic Thoroughbred Services commenced its financial service.
In New South Wales there has been a stricter interpretation of the ASIC Instrument. However, trainers and bloodstock agents and other unlicensed entities can easily avoid the need to comply. Whilst in South Australia, I see little evidence that TRSA have ever enforced any regulation of the sale of shares in horses.
I do acknowledge that Racing Victoria intend to implement a self-regulatory framework to regulate the sale of horses and shares in horses.
However, implementation of a revised self-regulatory framework will take time and would presumably require ASIC’s approval – quite a significant hurdle I would imagine.
I also suggest that self-regulation will ultimately prove unsuccessful in protecting consumers, fail to improve the industry’s reputation and fail to sustainably attract new owners into our great sport. The industry is losing owners every year due to the poor governance of financial transactions and other integrity concerns.
I am disappointed that Racing Victoria has not engaged Approved Promoters regarding the process towards self-regulation, despite promising to do so at a meeting at Racing Victoria’s office in August 2019. This uncertainty and lack of stakeholder communication and engagement has limited our ability to confidently invest in our business and support trainers and breeders.
Meanwhile, no protection exists for buyers of shares in horses unless the shares are being offered by an Approved Promoter/AFSL holder.
Proven impropriety on the part of numerous industry participants and widely circulated rumours of impropriety have a significant impact on the reputation of our industry and its participants.
I encourage Racing Australia and all PRAs to comprehend the growing public concern of inadequate disclosure and poor transparency of financial transactions in our industry. Actions taken in coming years could help turn the public’s poor perception around. Inaction will exacerbate the challenge to the sustainability of the industry.
I have enjoyed providing financial services to racehorse owners, trainers and breeders for six years, helping promote more than 150 horses and facilitate approximately 1,600 sales to 1,200 individuals.
Sincere thanks to the trainers who have utilised our financial service and truly wanted to provide both themselves and their clients the highest levels of security. I only hope Racing Australia and PRAs start actively supporting consumer protection and the mitigation of financial impropriety and money laundering risk.
Andrew Jarvis – Director, Kinematic Thoroughbred Services Pty Ltd