FSA obtains High Court injunctions stopping unauthorised mortgage investment scheme

The FSA has issued proceedings against Mr Richard Prentis of Ecclesfield, Sheffield and Mr Steven Halsey of Rotherham, South Yorkshire, and against their company Premier Property Investment (Europe) Ltd. The FSA alleges that the PPP scheme is an unauthorised Collective Investment Scheme operated in breach of s.3 of the Act, that unapproved investment advertisements have been issued in breach of s.57, and that false or misleading statements have been made to attract investors into the scheme in breach of s.47. The Defendants dispute the allegations.

The PPP scheme was advertised in the Daily Telegraph in August and in the Sunday Telegraph in September of this year. The advert offered a 13.5% guaranteed return and contained references to both the PIA and to IMRO. Those responding were sent a brochure telling them that their funds would be held in an account in the clients own name and thereafter would be used to make loans secured by way of first charge mortgage on commercial properties. Within a matter of weeks the scheme attracted funds exceeding 600,000. Mr Prentiss firm - Richard Prentis & Co solicitors which ran a similar mortgage investment scheme, was the subject of an intervention by the Law Society in June of this year. Mr Prentis is appealing against that intervention order.

The interim injunctions were obtained by the FSA in relation to the new PPP scheme on Friday 22 September 2000 freezing the company bank accounts. By that stage some of the funds had already passed to solicitors acting for potential borrowers, however the FSA also managed to freeze those funds before any loan transaction could be completed. The orders were served personally on the Defendants at their business address in Chapeltown, Sheffield.

On Friday 29 September 2000 the Defendants applied unsuccessfully to have the injunctions discharged. Mr Prentis, who together with Mr Halsey attended the hearing before Mr Justice Hart at the High Court in London, argued that the scheme fell outside the definition of a Collective Investment Scheme as set out in the Act. However, the Defendants accepted that investors funds had not been held in individual, named client accounts as described in the PPP brochure but rather had been pooled together in the bank account of a separate company called PPP-Client Account Ltd (the fourth Defendant).

After hearing argument on behalf of the FSA and on behalf of the Defendants, Mr Justice Hart gave a judgment in which he stated that he had little doubt that the arrangements as currently operated constituted a Collective Investment Scheme within section 75(1) of the Financial Services Act. He ordered that the asset freezing injunction and the injunction restraining the Defendants from contravening sections 3, 47 and 57 of the Act be continued until trial or further order.

Notes for editors

The relevant sections of the Financial Services Act 1986
1. Section 3: no person shall conduct investment business in the UK unless he is an authorised or exempted person. Contravention of section 3 of the Act is a criminal offence.

2. Section 47: any person who makes a statement, promise or forecast - which he knows to be misleading, false, or deceptive - for the purpose of inducing another person to enter into an investment agreement is guilty of a criminal offence.

3. Section 57: no person other than an authorised person shall issue or cause to be issued an investment advertisement in the UK unless its contents have been approved by an authorised person. Contravention of section 57 is a criminal offence.

4. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the protection of consumers; and fighting financial crime.

5. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.