The Financial Services Authority (FSA) has won a High Court victory against an illegal land banking firm.
The High Court declared that David Banner-Eve, Stuart Cohen, Asset Land Investments Plc and Asset L.I. ran an illegal land bank by operating a collective investment scheme without FSA authorisation.
The FSA said 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 FSA is aware of about 1,200 investors with some paying between £5,000 and £25,000 for each individual plot of land.
No planning permission has been obtained for any of the site marked by Asset Land to date, said the FSA.
Following this judgment the FSA will seek orders from the High Court banning Banner-Eve and Cohen for life from selling interests in land banking schemes for business purposes in the UK, it said.
The regulator will also seek orders from the High Court for the payment of at least £15 million by Banner-Eve, Cohen and the Asset Land companies to return to investors.
The Honourable Justice Andrew Smith found that in giving evidence at the trial, Banner-Eve had been deliberately dishonest and that he knew about the claims his sales brokers were making to investors.
Cohen did not attend the trial and has not participated in the proceedings.
In June 2012, the FSA froze the assets of Asset LI, which traded as Equity Services (London), and Asset Land Investment. The assets will remain frozen until the High Court decides the final amount to be paid to the regulator.
The FSA does not regulate the sale of land, but land banking can amount to running a collective investment sceme- something that does require FSA authorisation. Banner-Eve, Cohen and the Asset Land companies have never been authorised by the FSA, and as their business activities were illegal and unauthorised, investors are not covered by the Financial Services Compensation Scheme.
Tracey McDermott, director of enforcement and financial crime at the FSA, said: ‘Proving in court that the Asset Land operation was an unauthorised land bank sets an important precedent and puts us in a stronger position to tackle other land investment scams.
‘However, while this is an important case from a legal point of view, we are acutely aware that most, if not all, investors will only get a fraction of their money back. This is therefore something of a bittersweet victory.’