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FCA begins High Court battle against unregulated schemes
by Michelle Abrego on Oct 16, 2013 at 09:18
The Financial Conduct Authority (FCA) has kicked off its High Court battle against 16 parties involved in unregulated investment schemes it alleges to be operating illegally.
The FCA issued proceedings against Capital Alternatives and 15 other parties in July 2013, alleging that two investment schemes African Land and Reforestation Projects, also known as Capital Carbon Credits, were operating illegally.
Both schemes were promoted and sold by Capital Alternatives against which the regulator began its High Court battle yesterday.
The FCA’s case centres on whether the two schemes are collective investment schemes which would require them to be regulated by the FCA and authorised to operate in the UK.
The counsel for the defence argued that the schemes were not collectives and so were not operating illegally.
The court heard evidence from the FCA about the structures of African Land, which offers investments in rice farm harvests in Sierra Leone, and Reforestation Projects, also known as Capital Carbon Credits, which offers investments in carbon credits generated from land in Sierra Leone, Brazil and Australia.
The FCA questioned whether investors in African Land were getting pooled payments based on the plots of land they had individually invested in. The regulator also argued that the investment violated its ‘perimeter guidance’ because the farms being harvested were being managed as a whole.
Deputy High Court judge Nicholas Strauss asked the FCA: ‘How is this different from a block of flats or a hotel where you lease individual rooms?’
The FCA responded: ‘We say that the collective elements when you look at the expenditure is very considerable; construction, draining, roads, bridges, growing and irrigation and so forth. It would be curious if one could avoid the matter being a collective investment scheme simply by dividing up in different units.’
However the counsel for the defence, barrister Andrew Green of Blackstone Chambers, argued that investors in African Land received payouts which matched the value of the crops harvested from the plot of land they owned.
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