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FCA wins court battle against illegal land bank

FCA wins court battle against illegal land bank

The Financial Conduct Authority (FCA) has won a court battle against an unauthorised land bank, which a judge has ruled should pay around £20.9 million back to investors.

In February 2013, the High Court declared that Asset Land Investments, along with directors David Banner-Eve, Stuart Cohen, and another firm called Asset LI, ran an illegal land bank by operating a collective investment scheme without proper authorisation.

The regulator, then the Financial Services Authority, also sought orders from the High Court for interim payments of £20.9 million to be made to investors.

Asset Land appealed against Justice Andrew Smith’s decision, arguing that Smith’s interpretation of what constitutes a collective investment scheme, and his conclusion that the operations of Asset Land amounted to one, was wrong.

Asset Land also appealed the FCA’s request for the interim payment. As part of this appeal the firm argued that investors had not shown any sense of urgency in seeking repayment. The court found this argument to be irrelevant.

Justice Elizabeth Gloster said: 'I would dismiss the appeal [on the interim payout] on the grounds that the judge acted well within the ambit of his discretion in making the interim payout order. I would also hold that, on the evidence before him, he was entitled to make an interim payout order in the sums which he did.'

The other two appeal judges Justices Victoria Sharp and Colin Rimer both agreed with Gloster’s judgement.

From 2007 to 2011 Banner-Eve and Cohen sold plots of land across the UK through companies that promised investors significant profits within two to three years when the land obtained planning permission and was sold.

Investors were also told by Asset Land sales staff that the company would apply for the land to be ‘re-zoned’ to assist with obtaining planning permission and there were property developers lined up to purchase the sites.

The regulator previously said it was aware of about 1,200 investors with some paying between £5,000 and £25,000 for each individual plot of land. Asset Land had no planning permissions for any of the sites it marketed.

The court heard that Asset Land customers understood that the sites, where they owned plots of land, would be managed as a whole and be sold to developers for a substantial return.

Since the investors did not have day-to-day control and the plots were managed as a whole by Asset Land the FSA constituted it as a collective.

The FCA does not regulate the sale of land, but land banking can amount to running a collective investment scheme, which does require authorisation. Banner-Eve, Cohen and the Asset Land companies have never been authorised by the regulator and investors are not covered by the Financial Services Compensation Scheme.

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