Saturday, March 08, 2014

U.K. Court Affirms FCA Enforcement Action Against Collective Schemes

The U.K. High Court ruled that two investment schemes and a number of other firms were collective investment schemes promoted and operated without Financial Conduct Authority. The FCA had launched an enforcement action in July of 2013 in respect of two investment schemes. The defendants in the case had structured their schemes to try to avoid the need to be regulated by the FCA. However, the High Court agreed with the FCA that the schemes were unauthorized collective investment schemes and could not be lawfully operated by the defendants. Tracey McDermott, the FCA's Director of Enforcement, stated that the court’s ruling contributes to the FCA objective to protect consumers and enhance the integrity of the financial system. 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. The Director noted that this ruling shows that, even if operators have deliberately tried to structure their scheme to avoid regulation, the court will still look at whether those operating the scheme should in fact be regulated for consumer protection.

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