FCA wins High Court Ucis legal battle

Two investment schemes promoted by Capital Alternatives and 13 other firms were collective investment schemes and could not be lawfully operated by those firms, the High Court has ruled.

The defendants could be ordered to pay compensation which can be passed on to investors after the Court ruled two schemes were operating unlawfully, the Financial Conduct Authority said.

In July 2013 the FCA launched legal action regarding the two investment schemes.

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In response, Capital Alternatives said it would “vigorously” defend its case.

One, called African Land and also known as Agri Capital, offered investments in rice farm harvests in Sierra Leone and was run by African Land Limited.

The other, called Reforestation Projects and also known as Capital Carbon Credits, offered investments in carbon credits intended to be generated from land in Sierra Leone, Brazil and Australia, and was run by Reforestation Projects Limited.

According to a statement from the FCA, the defendants had structured their schemes to try to avoid being regulated by the FCA.

The High Court has now agreed with the FCA that the schemes were unauthorised collective investment schemes and could not be lawfully run by the defendants.

The regulator now awaits any appeal hearing that may arise before proceeding with whatever remains to be ruled on by the Court.

Tracey McDermott, the FCA’s director of enforcement and financial crime, said: “The FCA has an objective to protect consumers and enhance the integrity of the financial system. The Court’s ruling contributes to us achieving both.

“Collective investment schemes are complicated and investors put their money into the operator’s hands with no real control over what happens to their money.

“This ruling shows that even if operators have deliberately tried to structure their scheme to avoid regulation, the court will look at whether those operating the scheme should in fact be regulated for consumer protection.”