Security Executive Agent Directive 3 (SEAD 3) mandates that all cleared federal employees, contractors, and military personnel report specific personal activities, foreign associations, and potential security risks. Reporting is mandatory to maintain national security eligibility, and failure to self-report can result in the revocation of a security clearance.
This week’s Ask CJ is related to buying into a racehorse. Is this considered a reportable activity under SEAD 3?
One ClearanceJobsBlog subscriber writes:
“I have been thinking about buying into a partnership for a racehorse. I have always been into horses and riding in general. At one point I wanted to become a jockey when I was younger. So, I’d be buying it for fun and the experience.
However, I am wondering if it would have any effect on my security clearance. I would not be a managing partner, U.S.-only racing, I would own 5% or less and would have to have a New York Gaming Commission license to have access to the barns. I would make whatever percentage of the winnings if the horse placed in the money, which I’m not going in expecting to happen.
The cost is equivalent to putting 20% down on a nice RV, and the monthly cost for my percentage of ongoing care and training is less than RV payments would be. I won’t do it if it’s going to have an affect on my clearance and am only doing research right now. I would think that I’d need to report it, though.”
Owning a share of a racehorse may sound unusual, but from a security clearance perspective, it’s generally treated like any other investment or personal asset.
The key question isn’t whether you own a racehorse, it’s whether the investment creates circumstances that raise concerns under the adjudicative guidelines.
A Racehorse Is an Asset
Think of a racehorse partnership similarly to owning a boat, RV, rental property, or other hobby-related investment. Simply purchasing an asset does not typically trigger a requirement to self-report or affect your eligibility for a security clearance.
What investigators and adjudicators care about is whether the investment creates issues involving finances, foreign influence, criminal conduct, or other reportable concerns.
When It Could Become Relevant
The arrangement appears to be a small domestic investment with limited risk. However, there are a few situations where it could become relevant to your clearance:
- Financial concerns. If the investment creates significant debt, unpaid obligations, or financial strain, it could become relevant under Guideline F (Financial Considerations).
- Foreign involvement. If foreign owners, investors, racing syndicates, or business partners become involved, you may need to evaluate whether any foreign contacts or interests are reportable.
- Business ownership issues. Depending on the structure of the partnership, a substantial ownership stake could potentially create additional reporting obligations.
- Licensing or legal matters. Any issues involving gaming commission licensing, regulatory violations, or legal disputes could become relevant if they resulted in reportable legal actions.
If the horse would race only in the United States, the partnership would be domestic at 5% or less, and the poster would not serve as a managing partner, the investment appears to be more like a recreational investment than a business venture that would raise security concerns.
Keep Good Records
Even if the investment is not reportable today, maintaining organized records is a smart idea. Keep copies of partnership agreements, ownership documentation, financial contribution records and any licensing paperwork associated with participation.
Good documentation can help answer questions quickly during a future reinvestigation or security clearance update. Keep in mind that if your partnership is set up as a general partnership, a joint venture, or a manager-managed LLC where you are considered functionally active, the IRS views you as self-employed, which would require you to list this as an employment activity under 13A on the SF-86, when you update it in the future.
Being a passive investor or buying a small ownership stake in a domestic racehorse partnership is unlikely to affect a security clearance by itself. A racehorse is simply a financial asset, and ownership alone is generally not something that requires reporting.
The real clearance concerns would arise only if the investment led to financial problems, involved foreign interests, or created other issues that fall under the adjudicative guidelines.
As always, if your agency has specific reporting requirements or ethics rules regarding outside investments, check with your FSO for guidance before signing on the dotted line.
Much about the clearance process resembles the Pirate’s Code: “more what you’d call guidelines than actual rules.” For this reason, we maintain ClearanceJobsBlog.com – a forum where clearance seekers can ask the cleared community for advice on their specific security concerns. Ask CJ explores questions posed on the ClearanceJobs Blog forum, emails received, and comments from this site. This article is intended as general information only and should not be construed as legal advice. Consult an attorney regarding your specific situation.
