The FSA has won a High Court case against an illegal land banking firm ahead of efforts to return £15m to investors.
The High Court judgment was made against Asset Land Investments and Asset L.I. Incorporated last week, which was run by David Banner-Eve and Stuart Cohen. The High Court ruled they ran an illegal land bank by operating a collective investment scheme without FSA authorisation.
Banner-Eve and Cohen sold plots of land across the UK and told investors they would make a significant profit over two to three years when the land obtained planning permission and was sold.
Investors were also told by sales staff Asset Land would apply for the land to be ‘re-zoned’ to assist with obtaining planning permission and they had property developers lined up to purchase the sites.
The FSA says it is aware of about 1,200 investors with some paying between £5,000 and £25,000 for each plot of land. To date, no planning permission has been obtained for any of the sites marketed by Asset Land.
The Honourable Mr 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.
The regulator will now seek High Court orders banning Banner-Eve and Cohen for life from selling interests in land banking schemes for business purposes in the UK. The FSA will also seek High Court orders for the payment of at least £15m by Banner-Eve, Cohen and the Asset Land companies to return to investors.
In June 2012 the FSA obtained injunctions against Banner-Eve, Cohen and each of the Asset Land companies freezing their assets and prevented them from selling more land to investors. The assets will remain frozen until the High Court decides the final amount to be paid to the regulator.
The FSA says it is unclear how much will be returned to investors as it has not yet identified assets that would enable more than a small proportion of these payments to be made.
Trading Standards is also currently conducting a criminal investigation into Asset Land, Cohen and Banner-Eve.
Investors in the scam will not be covered by the Financial Services Compensation Scheme as the business activities of the asset land companies was unauthorised.
Banner-Eve, Cohen and the Asset Land companies were never authorised by the FSA. The FSA does not regulate the sale of land, but land banking can amount to collective investment which requires FSA authorisation.
FSA director of enforcement and financial crime Tracey McDermott says: “Proving in court 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. While we will continue to do everything in our power to tackle unauthorised businesses, consumers should also recognise the huge risks involved when investing with unauthorised businesses.”