The Supreme Court considered whether the activities carried out
by Asset Land were collective investment schemes ("CIS")
under section 235 Financial Services and Markets Act 2000
("FSMA"). If they were, then the company would fall foul
of section 19 FSMA, which prohibits anyone carrying on a regulated
activity unless authorised or exempt (the company being
The company purchased land which they divided and sold to
investors, promising significant profits when the land was granted
planning permission and sold on to a developer. These arrangements
are often referred to as 'land banking' schemes. The FSA
(as it was then) brought proceedings against the company and the
individuals involved, arguing that it operated an illegal CIS.
Asset Land responded that the investors were the legal owners of
the land so the transaction was not a CIS requiring
The Supreme Court held that Asset Land was the central operator
of the scheme; the individual investors did not have control over
their investments, despite being the legal owners of the individual
plots. Referring to section 235 FSMA, the Supreme Court found that
the words to "have control" are not necessarily limited
to the legal control of the investment; one should look at
"the reality" of how the arrangements are to be operated
and what was intended from the outset. The judge correctly found
that the management of the property as a whole comprised obtaining
planning permission and securing a sale to a developer; this being
within the company's remit and not the investors' giving
the company effective control.
Asset Land therefore operated a CIS that required approval and
they are required to pay GBP 21m back to investors. However, a
recent FCA press release indicates that the assets subject to
freezing injunctions will be insufficient to cover anything but a
very small proportion of that amount.
The decision brings some clarity to the question of what amounts
to a CIS and what will be taken into account by the court.
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