Another Crackdown on Land Banking Perpetrates FSA’s Consumer Protection Campaign

Jack Humphrey, Regulatory journalist
July 05, 2011 /

The Financial Services Authority (FSA) has secured “summary judgment” in the High Court against a Consolidated Land UK trader.

Stephen Watkins allegedly sold land illegally to UK consumers, court papers showed. The judgement ordered him to make an interim repayment of £920,000 to his victims via the FSA.

In addition, Watkins has also been banned for life from selling plots of land without notice to the FSA.

The FSA first took High Court action against land banking firm UK Land Investments Limited in 2008. Most recently, it obtained a High Court winding-up order against Plott UK Limited, another land banking operation.

“Plott promised its investors a return of investment of, on average, between 200 and 300%, yet at least one of the sites it was promoting was in a designated area of outstanding natural beauty and therefore highly unlikely to ever receive planning permission” according to the FSA then.

Although several Plott investors had put a minimum of £10,000 to the company, the FSA believed majority of them invested tens to hundreds of thousands of pounds.

On the other hand, the FSA claimed “Watkins sold plots of agricultural UK land, much of which was subject to planning restrictions, for over £11 million and made a very significant profit. He was stopped by an initial injunction obtained by the FSA in 2010.

“Watkins’s customers were told by his sales staff that he would seek planning permission for them and also help them to re-sell the land at a profit – a business commonly called land banking. In fact Watkins had no intention of seeking permission or helping his purchasers, many of whom paid him their life savings.”

Although the FSA does not regulate the sale of land, collective investment from land banking requires FSA authorization, which has not been granted to Watkins.

Tracey McDermott, the FSA’s acting director of enforcement and financial crime, said: “[The] judgment was the result of a lengthy FSA investigation involving over a year of litigation against Watkins.

“Anyone thinking of conducting financial services without FSA authorisation should take note. As this and many other recent and ongoing cases show, the FSA is not afraid to mount complex Court proceedings, both criminal and civil, to protect consumers and seek redress from unauthorised persons.

“Anybody investing in land should always have it independently valued to check its worth. Furthermore, if you are ever sold land as an investment, and on the basis that someone else will manage it for you as part of a wider site, you should seek the advice of an independent financial adviser authorised by the FSA.”

The FSA is currently pursuing six other High Court cases against additional land banking operations (having obtained initial injunctions against all of them) while investigating several others.

 

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