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Land banking company was operating collective investment scheme

In the FsA v Asset Land Investment Inc and others [2013] EWHC 178 the question for the High Court (Andrew smith J) was whether the land banking scheme operated by the defendant(s) was a "collective investment scheme" within the definition of section 235 FisMA 2000. Investors were sold plots of land at a number of sites. In evidence, the investors said that they understood the company would seek planning permission for the land and to sell it to developers at a profit. However, the contractual documentation and other disclaimers in written communications stated that the company would not apply for planning permission or otherwise manage the plots. It was conceded on behalf of the defendants that such management would make the scheme an arrangement caught by section 235 and thus requiring regulation for authorised or exempt persons only to conduct. Any persons not so authorised are in breach of the general prohibition in section 19 and the FsA sought such declarations. Thus it was the defendants primary contention that the contractual and other disclaimers took the land banking scheme outside of s235 as they were not "arrangements" within the definition in that section. Andrew smith J said that (para 154):"the purpose of the FsMA is, in part, to protect investors and the intention of the legislation must, in my judgment, have been to give them practical protection that does not depend upon an overly technical analysis of the contractual terms of their investments". He concluded that "arrangements" were made when the plots were marketed to the investors  "even if Asset Land had no intention of acting in accordance with them". He rejected the defendant's contention that the fact that investors could contractually deal with their individual plots as they wished meant that the company did not retain day to day control. Accordingly, he held that the defendants were operating an unauthorised collective scheme and gave judgment for the FsA accordingly.



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