The Financial Services Authority (FSA) today made significant steps in its crackdown on land banking with two important decisions at the High Court.
In one case the High Court made a winding up order against Plott UK Limited (Plott) and approved the appointment of a liquidator who will now identify, realise, and distribute the company’s assets to its creditors.
In a separate hearing, the High Court continued a world-wide freezing and restraint order against European Property Investments (UK) Limited (EPI).
The FSA believes that EPI is a ‘phoenix’ of Plott, that is: it took over Plott’s business once the FSA’s action against Plott began.
Plott
Between May 2009 and April 2011 Plott collected approximately £3.9 million from UK consumers.
Plott had been marketing plots of land as an investment opportunity and operating an unauthorised collective investment scheme (CIS). While the FSA does not regulate land as an investment, it does regulate the operation of CIS’s.
Plott promised its investors a return of investment of, on average, between 200 and 300%, yet at least one of the sites it was promoting was in a designated area of outstanding natural beauty and therefore highly unlikely to ever receive planning permission.
Many of its customers invested a minimum of £10,000 with the company, but the FSA is aware that many Plott customers invested many tens, and in some cases hundreds, of thousands of pounds with the company. Until the liquidator has completed its investigation into the company’s activities the FSA is unable to confirm whether any funds will be available to give back to Plott’s victims.
EPI
EPI owned two sites that Plott was promoting, however it appears to have only become active after the FSA had taken action against Plott.
In the short time it was operating, between 1st April and 27th May 2011, EPI accumulated around £639,000. Currently the FSA has managed to freeze and secure £180,000 while the rest was transferred out of EPI’s account before the freezing order was obtained.
The FSA is pursuing a civil case against EPI for operating an unauthorised CIS, but today’s injunction means that the firm will be breaking the law if it sells land or engages in any activity involving a CIS.
Tracey McDermott, the FSA’s acting director of enforcement and financial crime, said:
“This is an important outcome and sends a warning to other unauthorised land banks that the FSA can and will act decisively to shut them down.
“Consumers are much better off not putting their money into these schemes since, by the time we can catch up with the operators, most of the money has disappeared and investors are left with land thats value simply doesn't reflect the money paid for it.
“In our experience operators of unauthorised land banking schemes do not work in isolation, they often work together and their schemes are evolving. We are working hard to stop them but the lesson remains: do not deal with unauthorised businesses as you are not covered by the Financial Services Compensation Scheme.
“Once the dust has settled we hope to be able to repatriate remaining funds to customers of both companies, but it is likely that some people will not get any of their money back.”
If anybody thinks they may have been contacted by a land bank they can call the FSA’s consumer helpline for further guidance: 0845 606 1234.
The FSA also provides more information on land banks, as well as other types of financial scam, on the consumer information section of its website.
Background
- In the last 18 months the FSA has secured 11 injunctions against unauthorised businesses (seven for unauthorised land banks and four for unauthorised deposit taking).
- Court papers can be obtained by contacting the High Court and providing reference number HC11C01732.
- The FSA does not regulate land as an investment but collective investment schemes including those concerning land are subject to regulation.
- The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; securing the appropriate degree of protection for consumers; fighting financial crime; and contributing to the protection and enhancement of the stability of the UK financial system.