The FCA has won a High Court case against a number of firms for promoting and operating collective investment schemes without authorisation.
The regulator launched legal action in July against two investment schemes: African Land (also known as Agri Capital), which offered investments in rice farm harvests in Sierra Leone as run by African Land Limited; and Reforestation Projects (also known as Capital Carbon Credits) which offered investments in carbon credits intended to be generated from land in Sierra Leone, Brazil and Australia and is run by Reforestation Projects Limited.
The defendants in the case had structured their schemes to try to avoid the need to be regulated by the FCA.
However, the High Court agreed with the FCA that the schemes were unauthorised collective investment schemes and could not be lawfully operated by the defendants.
FCA director of enforcement and financial crime Tracey McDermott says: “The FCA has an objective to protect consumers and enhance the integrity of the financial system. The court’s ruling contributes to us achieving both.
“Collective investment schemes are complicated and investors put their money into the operator’s hands with no real control over what happens to their money.
“This ruling shows that even if operators have deliberately tried to structure their scheme to avoid regulation, the court will still look at whether those operating the scheme should in fact be regulated for consumer protection.”
The court may order the defendants to pay compensation that can be passed onto investors.
The judge has granted leave to appeal on certain aspects of the judgment so the FCA will have to wait until any appeal hearing and its outcome. It can then proceed with any remaining aspects of the case which still need to be ruled on by the court.
The FCA says further information will be provided to affected investors when it is available. At present, the previous undertakings and injunctions obtained by the FCA in July remain in place.