FCA in court proceedings against firms promoting CIS

According to a notice from the regulator, the high court in London has ordered a preliminary trial for Capital Alternatives and other firms and individuals for schemes that invest in African land and reforestation projects across the globe.

In the notice, published on the regulator’s website, it said the court action focused on two particular schemes.

The first one is African Land, also known as Agri Capita, which offers investments in rice farm harvests in Sierra Leone, and is operated by African Land Ltd.

The second scheme is Reforestation Projects, operated by Reforestation Projects Ltd. The scheme is also known as Capital Carbon Credits and offers investments in carbon credits generated from land in Sierra Leone, Brazil and Australia.

According to the interim hearings list at the high court, chancery division, published on 16 July, Judge Mr Justice Roth heard that the companies named in the case were the Capital Organisation Ltd, Capital Secretarial Ltd, Capital Admin Ltd, MH Trustees Ltd, African Land Ltd, Regency Capital Ltd and Reforestation Projects Ltd.

It has been estimated that the total sum paid to Capital Secretarial Ltd for the Capital Carbon Credits Ltd projects was £8.5m involving 919 investors.

In the notice, the FCA said: “We have asked the high court to find that Capital Alternatives Limited, African Land, Reforestation Projects and at least 13 other firms and individuals were promoting and/or operating collective investment schemes in the UK illegally and without our authorisation.

“We do not regulate the sale of land, property or carbon credits, but we do regulate collective investment schemes and a firm must be authorised by us to operate them from the UK.”

The regulator added it had reason to believe that “the defendants made misleading statements or gave false information when promoting the schemes to investors”.

According to the FCA, it obtained undertakings and court orders that froze the major assets of most of the defendants and prevented them from promoting the schemes while a date for the hearing has been set.

If the court will decide if the schemes have been run or promoted illegally as collective investment schemes and it can order the defendants to pay compensation to the FCA, which will then be paid to investors in the schemes. However the FCA warned investors that even if the court were to grant a compensation order, many similar cases have resulted in investors not being able to reclaim the full amount because the defendants did not have enough assets or funds.

The date of the hearing is expected some time this autumn.

Adviser view

Neil Mumford, director of Surrey-based Milestone Wealth Management, said: “The FCA is right to try and stop the promotion of these types of schemes and IFAs should, in turn, be taking a diligent approach. But advisers don’t have all the information and resources at their disposal when they are approached to properly investigate these schemes so if in doubt, most steer clear.”