Restraint, Freezing Order Issued Against Land Bank

Jack Humphrey, Regulatory journalist
June 09, 2011 /

The Financial Services Authority (FSA) has wound up the order against an unauthorized land bank and secured injunction against another bank as part of its crackdown campaign on land banking.

The High Court has released two “important decisions”, one winding up the order against Plott UK Limited and the other approving the appointment of a liquidator who will identify and distribute the company’s assets to creditors.

The FSA, on the other hand, earlier warned structured product providers to justify the use of terms such as ‘guaranteed’, ‘protected’ and ‘secure’ in marketing. The FSA believed financial firms lack risk details in advertising their products to consumers.

In a separate hearing, the High Court continued a world-wide freezing and restraint order against European Property Investments (UK) Limited (EPI), which took over Plott’s business once the FSA’s action against Plott began.

According to the FSA, Plott collected nearly £3.9 million from UK consumers between May 2009 and April 2011.
Between this period, the land bank allegedly marketed plots of land as an investment opportunity and operated an unauthorised collective investment scheme (CIS).

The FSA does not regulate land as an investment, but it oversees the operation of CIS’s.

“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,” the FSa said.

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.

“Until the liquidator has completed its investigation into the company’s activities the FSA is unable to confirm whether any funds will be available to give back to Plott’s victims,” the FSA said.

Meanwhile, EPI became active owner of two sites promoted by Plott after the FSA took action against Plott.

The FSA claimed that “in a short time, it was operating, between 1st April and 27th May 2011, EPI accumulated around £639,000. Currently the FSA has managed to freeze and secure £180,000 while the rest was transferred out of EPI’s account before the freezing order was obtained.”

The injunction issued against the land bank forbids the firm from selling land or engage in any activity involving a CIS.

Tracey McDermott, the FSA’s acting director of enforcement and financial crime, said: “Consumers are much better off not putting their money into these schemes since, by the time we can catch up with the operators, most of the money has disappeared and investors are left with land whose value simply doesn’t reflect the money paid for it.

“In our experience operators of unauthorised land banking schemes do not work in isolation, they often work together and their schemes are evolving. We are working hard to stop them but the lesson remains: do not deal with unauthorised businesses as you are not covered by the Financial Services Compensation Scheme.

“Once the dust has settled we hope to be able to repatriate remaining funds to customers of both companies, but it is likely that some people will not get any of their money back.”


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