UK: England and Wales: Court of Appeal considers section 235 definition of 'collective investment scheme'

The Court of Appeal gave judgment last week in Asset Land Investment Plc v The Financial Conduct Authority (FCA) [2014] EWCA Civ 435. This is an important decision on the definition of a collective investment scheme under section 235 of the Financial Services and Markets Act 2000. In particular, the court considered the meaning of 'arrangement' as used in section 235. Lady Justice Gloster (with whom Lady Justice Sharp and Lord Justice Rimer agreed) stated (paras. [50] and [52]):

The authorities demonstrate that, when interpreted together, sections 235(1), (2) and (3) are drafted in such a way as to justify the giving of a very wide meaning to term "arrangements" in section 235(1), which includes understandings and agreements that are not legally binding ... I cannot accept [the] submission that in order for an 'arrangement' to exist, there has to be "a mutual expectation of adherence" to be represented arrangements. The existence of "arrangements" for the purposes of section 235 cannot depend upon what might be an involved investigation into the subjective intentions and expectations of a representor, whose representations have caused investors to reach certain understandings. Such an approach would unduly and illogically restrict the ambit and effect of section 235".