The Court of Appeal has dismissed, on all counts, an appeal by David Banner-Eve and Asset Land L.I.
Asset Land L.I. was a land banking firm, run by Banner-Eve and his associates, selling plots of land as investments in Stansted, Harrogate, Lutterworth, Newbury, Liphook and South Godstone.
The judgment makes clear that the law around collective investment schemes (CIS), which require Financial Conduct Authority (FCA) authorisation, does apply to these types of scheme and that any effort to avoid authorisation on technical legal points will be unlikely to succeed.
The decision paves the way for some money to be returned to investors, but it is unlikely to be the full amount.
Tracey McDermott, director of enforcement and financial crime at the FCA, said:
"Winning this case sets an important legal precedent in the fight against unauthorised business. Firms trying to exploit loopholes to claim that they are not running collective investment schemes should be clear - it simply will not work.
"This is a clear warning to any firm selling dubious investments and I reiterate it today: we will come after you, we will shut you down, and we will do whatever we can to ensure money you have taken, no matter how much - or little - is left, is used to reimburse your victims.
"We constantly see new variations on these schemes. If someone is contacted out of the blue with an offer that is too good to be true - it probably is. Put down the phone and keep your money."
In February 2013 the FSA won a key victory in the High Court in the battle against unauthorised businesses; it was found that David Banner-Eve, Stuart Cohen, Asset Land investments plc and Asset L.I Inc ran an illegal land bank by operating a CIS without authorisation. As the scheme was not regulated, the investors had no recourse to the Financial Services Compensation Scheme.
Banner-Eve and Asset Land L.I. appealed however; they argued that they were not running a CIS. The Court of Appeal’s decision makes it clear that the Court will look at what the scheme actually involves rather than what the operators try to dress it up as.
The High Court made an order in March 2013 that David Banner-Eve, Stuart Cohen, Asset Land investments plc and Asset L.I Inc make a preliminary payment to the FCA of £21 million as part repayment for investors. That order has been stayed pending the Court of Appeal’s decision. It will remain stayed pending the outcome of any appeal to the Supreme Court.
The FCA is aiming to return as much as money possible to investors, but it is unlikely to be the full amount they invested. Unfortunately the FCA has not identified any assets of the defendants that would enable more than a small proportion of these payments to be made.
This decision follows a similar judgment against Capital Alternatives in February 2014 which also made clear that the FCA’s approach was sound.
The Defendants in CAL are seeking to take this to the Court of Appeal.
The Asset Land Appeal decision could still be appealed to the Supreme Court.
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