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The FSA has approached the High Court to shut down the UK's largest landbanking company, UKLI, claiming it has operated as "an illegal collective investment scheme" and denied "investors protection for their money".

The watchdog first presented a petition to wind up the Mayfair-based company on 1 April. This was then heard by the London Companies Court at the end of May.

The regulator has so far obtained an interim freezing and restraining order against the firm, to protect its assets for creditors, including investors, and to prevent it from continuing to operate as an illegal investment scheme.

According to the FSA, UKLI advertised and sold plots of land, saying would then receive planning permission for the land, which would increase in value and make investors a large profit once it was sold to a developer.

The authority said roughly 4500 investors had paid UKLI a total of £69m, but none of the land was ever granted planning permission.

Despite acting as a collective investment scheme, the FSA was not authorising it, which means investors cannot claim compensation from the Financial Services Compensation Scheme.

Jonathan Phelan, head of retail enforcement, said: "The FSA will not hesitate to pursue companies like UKLI, which offer unauthorised and illegal services that put such investments at unnecessary risk.

"We will continue to do everything possible to keep people safe from illegal schemes that deny them their right to complain and get compensation when things go wrong.

"Our action against UKLI should serve as a warning to other companies that might be breaking the law in this way."

Although the FSA could not comment when it first became aware of the company's activities, a spokeswoman confirmed it had been carrying out research on landbanking firms for roughly two years.

The spokeswoman added: "It is possible other landbanking firms could be operating as collective investment schemes. They need to call the FSA to see if they need to be regulated by us, but it would depend on their individual business model.

"We are asking firms to check with us if they need to be authorised," she added.

Since the FSA's petition was filed, Lee Manning and Carlton Siddle of Deloitte have been appointed as joint administrators of UKLI. The firm was placed in administration because it is now insolvent and would be unable to meet any future liabilities.

The administrators are in the process of contacting all investors who have bought land from UKLI and will relay more information as events unfold. UKLI was unavailable for comment.