Financial watchdogs are embroiled in a costly battle against unregulated collective investment schemes that are alleged to be running illegally.
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The FCA has spent nearly £425,000 arguing a case in the High Court only to see the judge only partly rule the schemes were unlawful and to grant leave for the operators to appeal some of his decisions.
The High Court challenge started in October 13, when the Financial Conduct Authority (FCA) argued before Judge Nicholas Strauss QC that African Land and Reforestation Projects, also trading as Capital Carbon Credits, should have applied for regulation as collective investment schemes.
The judge was told that to trade in the UK as collective investment schemes, the firms needed to register with the FCA.
The firm’s put forward a defence claiming investments and assets were not pooled, so they did not net to register.
Judge Strauss however rejected the defence and has ruled in favour of the FCA.
Armchair investors
“I agree that the schemes under consideration are, and have been since their inception, collective investment schemes,” he said.
“The investors are armchair investors; their practical involvement is limited to receiving occasional written progress reports and in the case of some, being shown around.”
African Land investments are in rice farm harvests in Sierra Leone.
Reforestation Projects, also called Capital Carbon Credits, offered carbon credits relating to land in Sierra Leone, Brazil and Australia.
The judge allowed African Land and the Australian carbon credit scheme run by Reforestation Projects to appeal.
He also rejected the FCA’s claims that the investments were missold through marketing materials and that African Land did not separate individual plots for investors and pooled their returns contrary to marketing information given to investors.
African Land confirmed the decision would be appealed.
Warnings
The FCA has also issued these warnings about bogus firms posing as regulated financial advisers:
- CNB Acquisitions Inc
- Knightsbridge Trading Academy
Unregulated Risks
If you buy shares, save money or invest with an unregulated firm, you lose any protection offered by the Financial Ombudsman and the Financial Services Compensation Scheme. Broadly, you have no independent place to complain if the deal goes wrong and are unlikely to win any compensation.
A List of Regulated Firms
Go to the Financial Services Register to check if a firm is regulated in the UK.
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