We receive many reports about tree and crop plots abroad, and other ethical and alternative investment opportunities being offered to investors without the protection of UK complaints procedures or compensation schemes if things go wrong.
These schemes may be promoted by an operator ‘cold calling’ with an offer for you to buy a plot on a plantation which harvests agricultural commodities such as teak trees, jatropha, paulownia and biofuels.
The investment is usually stated to be low risk but promising high, often guaranteed returns of around 15-25%. The investment period is typically about five years, after which your plot will be harvested and sold on your behalf and the profits forwarded to you.
We have heard reports of promoters using aggressive, high-pressure sales tactics, and often claiming we do not need to authorise the schemes, as they are not collective investment schemes (CIS).
While we regulate CIS, we do not regulate the sale of land, trees or crops.
Following on from our investigations and warning in July 2010 about the rise of unregulated collective investment schemes (UCIS), many of the tree and crop schemes we are investigating are not authorised by us. In fact, most are – on the face of it – structured in such a way as to avoid the need for our authorisation.
Determining whether a scheme is a CIS or not is often a complex, legal matter. Broadly speaking, the characteristics of a CIS include:
Keep in mind that you will not have access to complaints procedures or compensation schemes if a firm or scheme is not regulated by us and things go wrong.
Certain schemes that have been brought to our attention claim investors do have day to day control over their plot, despite the land being located thousands of miles away. For example, investors may be told they have complete control over when they harvest their particular plot or can appoint local agents of their choice to manage the plot for them.
We are concerned how this can operate in practice, but it is very difficult for us – and investors – to know how the schemes really work when the plots are located so far away.
We are continuing to look into several schemes to establish whether they are CIS, but we suggest investors treat such opportunities with caution.
If you have been approached by someone promoting one of these schemes or are concerned about an investment you have made, please contact our Consumer Helpline on 0800 111 6768 and pass on as much information as possible about the scheme and the people who contacted you.
While these schemes may be of interest to some investors, you should consult an independent financial adviser or lawyer for guidance on whether an investment is suitable for your circumstances.
t: 0800 111 6768
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