FSA to crack down on landbanking

8 June 2011

The Financial Services Authority has cracked down on landbanking after a company promised returns of up to 300% for land that was in an area of outstanding national beauty and highly unlikely to ever receive planning permission.

Plott UK collected around £3.9 million from investors over the past two years and promised average returns of between 200 and 300%.

Today the financial watchdog won a winding up order against the firm in the High Court. In a separate hearing it also won a victory over European Property Investments (UK), which the FSA believes is a phoenix of Plott, taking over Plott's business once the FSA's action against Plott began.

Thousands invested

Many of Plott's customers invested a minimum of £10,000, although a large number also invested many tens, and in some cases hundreds, of thousands of pounds with the company.

The FSA says that until the liquidator has completed its investigation into the company's activities it is unable to confirm whether any funds will be available to give back to Plott's victims.

EPI was set up on 1 April and between then and 25 May it had accumulated around £639,000. It owned two sites that Plott was promoting and appeared to have only become active after the FSA had taken action against Plott.

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.

Today the High Court continued the freezing and restraint order. The injunction means that the firm will be breaking the law if it sells land or engages in any activity involving a collective investment scheme. Technically the FSA does not regulate land as an investment but collective investment schemes, which include landbanking, are subject to regulation.

Sending a message

Tracey McDermott, the FSA's acting director of enforcement and financial crime, says the court rulings "send a warning to other unauthorised land banks that the FSA can and will act decisively to shut them down".

She adds: "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 thats 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."

In the last 18 months the FSA has secured 11 injunctions against unauthorised businesses (seven for unauthorised landbanks and four for unauthorised deposit taking).

Last year the FSA closed down five firms that had ripped investors off to the tune of £42 million.

If you think you have been contacted by a landbank, call the FSA's consumer helpline for further guidance: 0845 606 1234.

This article was written for Money Observer

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