3.2 Promoter of interests in a horse racing scheme

The term “promoter” is not defined in the Act or the ASIC Instrument, so must be given an ordinary meaning.

“promote” means:

          “support or actively encourage (a cause, venture, etc.)”.

“promoter” is defined:

  1. in ASIC RG91[2016] and RG91[2012]

    “a person who offers to sell, or invites people to buy, interests in a managed investment scheme”.

    This definition replaces the definition set out in RG91 [2007]:

    “the person who agrees to operate the managed investment scheme”.

  2. in AR.2 of the ARR

    “any person or corporation who for valuable consideration offers or invites any other person or corporation to subscribe for shares or participate in any scheme with objects that include the breeding and/or racing of a horse”.

With respect to ASIC, the 2007 definition was a misstatement which it corrected in 2012.

The RG is not law, being a publication issued by ASIC to promote an understanding of the current law by industry participants. Save for this error in the first edition, the RG is an informative document.

The writer considers that this misstatement may have contributed to a misunderstanding of the current law by some industry participants who have subsequently argued, incorrectly, that if the terms of an offer of shares propose that:

  1. a person other than the promoter will manage the horse on behalf of the members; or
  2. the members will appoint the manager;

this will somehow constitute the members having “day-to-day” control over the operation of the scheme, AND consequently the scheme will fall outside of the definition of a managed investment scheme and the promoter need not be licensed.

 The phrase “in the business of” in section 601ED(1)(b) can be given its ordinary meaning:

“engaging in a commercial activity with system, repetition and continuity”.

The promoter “carrying on a business” test requires an objective analysis of the peculiar features of each case, attributing an ordinary meaning to the words “carrying on a business” and applying the principles established by the case law.