The FCA became aware in 2007 that the Appellant, through its principal director Mr David Banner-Eve ("Mr Banner-Eve"), was acquiring farmland and dividing this up and selling it as individual plots of investment land at six possible development sites in various parts of England. The land was sold to investors by the Appellant which was representing itself as responsible for seeking rezoning for residential development and for arranging the ongoing sale. Following communications with the Appellant's solicitors the FCA accepted assurances that the company would cease to make such representations.

Subsequent exchanges between the Appellant and the FCA in July 2008 disclosed that there were by then 64 plot owners. It was agreed that these owners should be offered the choice of exchanging their existing plots, for plots which were larger in size and had access to services and roads, the purpose of which was to enable the plot owners to make an application for planning permission themselves in respect of their individual plots or of selling the plots back to the Appellant for the original purchase price. The majority of the plot owners chose to receive an enhanced plot.

The FCA closed its inquiry in November 2008 but subsequently formed the view in June 2011 that the agreed restrictions had not been observed and the inquiry was reopened.

The proceedings which are the subject of the appeal to the Supreme Court were commenced in June 2012 against Asset Land Investment plc and associated parties, following the FCA obtaining a worldwide freezing order against the Appellant and Mr Banner-Eve, for allegedly carrying on regulated activities without authorisation, contrary to the general prohibition in s19 of FSMA.

In February 2013, Andrew Smith J decided the Appellant's activities amounted to a collective investment scheme ("CIS") which had not been authorised for which the investors had no recourse to the Financial Services Compensation Scheme. Subsequently, in March 2013, he made interim orders for payments in excess of £20m based on estimates by the FCA of amounts paid by investors for their plots which had a nil value without planning permission. The enforcement of the orders was suspended pending an appeal to the Court of Appeal and any appeal the Supreme Court notwithstanding Smith J's decision on liability being upheld by the Court of Appeal.


The issue to be decided on the appeal to the Supreme Court was whether the activities undertaken by the Appellant amounted to a "collective investment scheme" within the meaning of s235 of FSMA and thus were regulated activities.


The appeal raised the question of whether the FCA's understanding of s235 of FSMA is correct and specifically whether the law was correctly applied to the facts of the case.

S235(1) defines a collective investment scheme as any arrangement with respect to property of any description, including money, the purpose or effect of which is to enable persons taking part in the arrangements (whether by becoming owners of the property or any part of it or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income.

The Appellants grounds of appeal were in summary, principally as follows:

  1. The Court of Appeal erred in its identification of the component parts of the arrangements and in particular gave inadequate weight to an essential feature of the arrangements namely that each investor was intended to (and in fact did) own the plot outright;
  2. Under s235 (2) and (3) the court erred in treating "the property" as each of the sites acquired by the appellant, rather than "the aggregate, from time to time, of all the plots sold to and owned outright by individual investors, together with all the investor's appurtenant rights." The investors had the necessary control as they owned their individual plots outright, had full control of their inclusion in the scheme or eventual sale, and so between them had day to day control of the management of the relevant property; and
  3. Under s235(3)(b) the critical question was whether the arrangements reserved to the investor the final decision as to the exploitation of the property pursuant to the arrangements.

The Supreme Court unanimously dismissed the appeal and held that the word "arrangements" had its ordinary meaning. There was therefore no dispute that the Appellant's did enter into arrangements within the meaning of s235 of FSMA as it involved the sale of a property in small units to investors with a view to participation in the development profits of the site.

There is overlap in relation to grounds 2 and 3 but the Court found it clear that the meaning of the relevant "property" for the purpose of s235 (1) was each of the Appellant's sites taken as a whole and not individual plots. It did not agree with the suggested analogy that s235(1) would not apply to a block of flats because the individual flat owners had day to day control as management control.


This is the first case to reach the Supreme Court on the regulation of CIS schemes and the judgments of Lord Carnwath and Lord Sumption provide useful guidance on the distinguishing features of the operation of a CIS.

A breach of the general prohibition carries serious consequences for an infringer and could result in the commitment of a criminal offence, the unenforceability of the contract in addition to provision for the payment of compensation and restitution. The FCA has demonstrated a clear commitment to protecting consumers' against unauthorised firms offering CIS and it is anticipated that this commitment will continue to be evidenced with the continued use of supervision and enforcement powers.