The defendant appealed against a finding that the pooled betting scheme they operated was governed by the Act.
Held: Whether such an arrangement amounted to a collective investment scheme so as to be regulated was first a question of fact as to whether there was a single set of arrangements so as to constitute a scheme. If so the court then asked a question of law as to whether the defendants’ participation amounted to having day to day control over the management of the scheme.
Arden LJ discussed the 2000 Act: ‘The FSMA is a portmanteau statute dealing with all kinds of investment activity, not just activities in traditional investments such as securities. The former system of self-regulation in specific areas has been abolished. Instead, the demanding function of regulating the numerous and disparate activities that take place in the financial services industry in the United Kingdom is now vested in the FSA pursuant to FSMA. Under section 2(2) of FSMA, the regulatory objectives of the FSA are market confidence, public awareness, the protection of investors and the reduction of financial crime. In discharging its functions the FSA has to have regard to a number of factors, including the principle that the burden placed on a person should be proportionate to the benefits, considered in general terms, which are expected to result from the imposition of that burden or restriction. To enable the FSA to regulate the many different types of activity in the financial services industry, section 19 of FSMA . . imposes a general prohibition on the carrying on of regulated activities (as defined in section 22 of the FSMA, . . ) without authorisation or exemption. Regulated activities include the operation of . . a ‘CIS’. This concept is defined in section 235 of FSMA . . At the heart of the concept . . is the requirement for the sharing of profit or income by participants who do not have day-to-day control over the management of the property. A paradigm example of a CIS would be a unit trust, but the definition applies in many more situations than that. The general prohibition in section 19 on unauthorised investment activity is buttressed by a number of other prohibitions, including a prohibition on the promotion of invitations to engage in financial activity unless authorised (section 21 . .). Finally, the FSA is empowered to seek injunctions to restrain anticipated breaches of the basic prohibition in section 19, and also orders for the disgorging of profits by persons who have contravened FSMA and the payment by them of compensation to persons who have been adversely affected by their contraventions (sections 380 and 382 of FSMA).’
Judges:
Ward, Arden LJJ, Collins J
Citations:
[2005] EWCA Civ 1183, Times 01-Dec-2005, [2006] 2 BCLC 616
Links:
Statutes:
Financial Services Markets Act 2000 19
Jurisdiction:
England and Wales
Citing:
At ChD – Financial Services Authority v Fradley and Another ChD 21-Oct-2004
The authority sought an order restraining the defendants from operating a pool betting scheme whilst unauthorised. The defendant answered that it was not a collective investment scheme.
Held: Where any property was acquired which was distinct . .
Cited by:
Cited – The Financial Services Authority v Asset L I Inc and Others ChD 8-Feb-2013
The court was asked whether so-called ‘land-banking’ schemes were ‘collective investments schemes’ within section 235.
Held: Andrew Smith J discussed the difference in effect between the contra preferentem rule, and regulation 7 of the 1999 . .
Cited – Asset Land Investment Plc and Another v The Financial Conduct Authority CA 10-Apr-2014
The court was asked whether certain sales of land, or arrangements relating to sales of land, at six sites in England were ‘collective investment schemes’ within the meaning of section 235 of the 2000 Act. The company appealed from a finding that . .
Cited – Asset Land Investment Plc and Another v The Financial Conduct Authority SC 20-Apr-2016
Proceedings were brought against the appellant’s associated parties, alleging that they had carred on regulated activities without authorisation, contrary to section 19 of the2000 Act. They had offered various plots of land for sale, suggesting they . .
Lists of cited by and citing cases may be incomplete.
Financial Services
Updated: 04 July 2022; Ref: scu.235335
